New CBO Estimate Should Send IDR Plan Back to Drawing Board
The Congressional Budget Office (CBO) estimates the President’s proposed income-driven repayment (IDR) plan for student loans will cost $230 billion over the next decade, nearly $100 billion more than the Department of Education’s $138 billion estimate. The cost will rise to $276 billion – more than twice the Administration’s estimate – if the Supreme Court rules the President’s companion debt cancellation plan to be illegal. We’ve previously shown that the new IDR plan, which is currently going through the rule-making process, is highly problematic and would cost more than advertised. We also submitted comments that made a number of recommendations and suggestions regarding the preliminary rule.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
$230 billion is a massive amount of money, at a time when inflation is surging and debt is approaching record levels. The total cost of the President’s student debt plans may be close to a trillion dollars – and all to be spent without Congressional approval.
Based on CBO’s estimate, the IDR plan is likely to cost $100 billion more than what the White House thought, and could cost twice as much as the Administration found – a whopping $276 billion – if the debt cancellation plan is ruled illegal.
The Administration should go back to the drawing board and work with Congress on a more responsible set of student debt reforms. At a minimum, policymakers should delay implementation of this rule so there is more time to study its implications and more opportunity to consider more sensible alternatives.
While well intentioned, the new IDR plan would transform student debt into a tuition lottery, where debt forgiveness will be widespread and only tenuously related to need. The plan will provide huge windfalls to doctors and lawyers at a huge expense to taxpayers.
As the CBO estimate highlights, the IDR plan will not only cause millions of borrowers to flock to the new repayment plan, but also spur substantial new borrowing, drive up tuition and higher education costs, and support the expansion of low-quality degrees that end up putting students at a financial disadvantage over their lifetimes.
At the high end, the cost of this IDR plan is three times as large as the President’s plan for free community college. In fact, it would cost more than all of the President’s higher education proposals put together, including mandatory funds to help double Pell grants.
This level of spending should not even be considered without an offset plan, let alone enacted through executive fiat.
The President should delay or abandon his current IDR plan and work with Congress on a more comprehensive framework to responsibly support struggling borrowers, reduce higher education costs, and demand accountability for institutions of higher learning.
For more information, please contact Matt Klucher, Communications Manager, at email@example.com.