A new model just published by the prestigious — and non-partisan — Penn-Wharton School at the University of Pennsylvania shows that rather than the $300 billion number being thrown around by Democrats as the cost of the student debt bailout plan, the true cost is at least $519 billion for debt cancellation alone. And there are other factors to consider, making the total cost of the plan at least $605 billion and perhaps as much as $1 trillion.
President Biden’s new student loan forgiveness plan includes three major components. We estimate that debt cancellation alone will cost up to $519 billion, with about 75% of the benefit accruing to households making $88,000 or less. Loan forbearance will cost another $16 billion. The new income-driven repayment (IDR) program would cost another $70 billion, increasing the total plan cost to $605 billion under strict “static” assumptions. However, depending on future IDR program details to be released and potential behavioral (i.e., “non-static”) changes, total plan costs could exceed $1 trillion.
If you were to ask the voters before midterms if $1 trillion in debts willingly and eagerly taken on by students should be forgiven at taxpayer expense, I wonder what the answer would be? We’ll probably find out on election day.
As with all polls on issues, it depends on how you ask the question. One partisan Democratic poll taken after Biden’s announcement showed 60% of voters support forgiving college loan debt. Another poll shows 59% of voters worried that forgiving student debt will lead to higher inflation. Another poll found near 50-50 support/opposition to forgiving $10,000 in student loan debt, but an overwhelming majority believes the government should prioritize making college more affordable over forgiving existing student loans.
This is not a popularity contest. We’re talking about a trillion dollars in taxpayer money being spent to essentially buy the support of a key Democratic Party constituency.
Related: The Student Loan Shell Game
There’s also a question of administering this gargantuan program — far more ambitious than Obamacare. And if you liked the way the government ran the COVID-19 relief programs, you are gonna LOVE how this student loan bailout plan is going to go down.
The New York Times reported on August 16 that “Investigators say there was so much fraud in federal Covid-relief programs that — even after two years of work and hundreds of prosecutions — they’re still just getting started.”
Are you ready for this from the Department of Education?
The agency doesn’t have income data for most of the 43 million Americans eligible for forgiveness, meaning around 35 million people — including Pell Grant recipients — will have to attest that they makes less than $125,000 per year and apply for relief.
What we’re watching: StudentAid.gov, the government’s financial aid website, experienced significant delays Wednesday and Thursday after it was inundated with people seeking information on loan forgiveness.
The White House doesn’t know exactly how many eligible borrowers will actually end up applying for loan forgiveness — or how much it will cost.
The Education Department hasn’t yet released the website where people can apply for loan forgiveness by attesting that they meet the income requirement — and it’s still unclear when that will be released, a person familiar with the matter tells Axios.
Is this a great government, or what?
Experts caution that the agency may not be equipped to accomplish such a massive undertaking.
“It’s an understaffed and overcommitted organization,” Charlie Eaton, a UC Merced associate professor of sociology and student loan expert, tells Axios.
The rub: The Biden administration says the loan payment moratorium will end in January — and for that to happen “it’s going to be really important borrowers have actually had a chance to declare their eligibility for loan forgiveness,” Eaton says.
“Even if borrowers complete online attestations of their income and the online system works, the loan servicers will then need adequate time to adjust every borrower’s balance and new payment levels,” he adds.
“May not be equipped.” “Understaffed and overcommitted.” Did Biden ask anyone, anywhere, at any time how the hell this program was going to work and how the Education Department was going to safeguard the taxpayer’s money?
God save us from fools.
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