Price Tag of Biden Plan to Overhaul Income-Driven Student Loan Repayments: $230 Billion

The Biden administration’s plan to overhaul a federal student loan repayment program that pegs monthly payments to a borrower’s income would cost $230 billion over 10 years, according to a new estimate from the Congressional Budget Office – nearly double the price tag touted by the White House when it first proposed the plan in January.

MORE: Supreme Court to Hear Case Against Biden Student Loan Debt Cancellation Plan

The administration initially estimated that the changes to the repayment plan, which would halve monthly repayments for millions of borrowers among other things, would cost roughly $138 billion. It marks the second time that the administration has significantly underestimated the cost of a major student loan change.

Last year, the White House estimated that its sprawling student loan debt cancellation plan would cost $380 billion, but CBO scored it at $400 billion.

Republicans already opposed the changes to the income-driven repayment plan because it is being pursued through the regulatory rulemaking process – meaning it doesn’t need authorization by Congress. And they wasted no time on Monday slamming it again.

“These student loan schemes do not cancel debt, they just transfer it from those who chose to take out loans to those who did not,” said Sen. Bill Cassidy, Louisiana Republican and new ranking member of the Health, Education, Labor and Pensions Committee. “President Biden’s IDR rule is not only irresponsible but deeply unfair to those who chose not to go to college or sacrificed to pay off their loans and will now have to foot the bill.”

Cassidy and Rep. Virginia Foxx, North Carolina Republican and chairwoman of the Education and the Workforce Committee, led a bicameral letter to Education Secretary Miguel Cardona last month that questioned the administration’s initial cost estimate and called the new income-driven repayment plan “reckless, fiscally irresponsible, and blatantly illegal.”

The letter also skewered the administration for refusing to address the issue with members of Congress, many of whom have been trying to find common ground to overhaul the program through a reauthorization of the Higher Education Act.

“The administration’s Income-Driven Repayment rule is nothing more than a backdoor attempt to provide free college by executive fiat,” Foxx said Monday in a statement. “Transferring $230 billion from borrowers who willingly took out debt to taxpayers who did not is fiscally irresponsible and morally reprehensible. Make no mistake, I soundly reject this illegal abuse of power.”

The proposed income-driven repayment rule would reduce payments to 5% of a borrower’s discretionary income monthly on undergraduate loans – down from the current 10%. It would also raise the amount of income that is considered non-discretionary income – and, therefore, protected from repayment – to 225% of the Federal Poverty Line (or $32,805 for an individual), from 150% (or $21,870 for an individual).

The new rule would also cover borrowers’ unpaid monthly interest so that, unlike existing income-driven repayment plans, no borrower’s loan balance would grow. In addition, the plan would forgive loan balances after 10 years of payments instead of 20 years for borrowers with loan balances of $12,000 or less.

The proposal came as Biden’s major student loan cancellation plan, which would eliminate up to $20,000 in debt and cost up to $400 billion according to CBO, is tangled up in lawsuits before the Supreme Court. Before the plan was frozen, roughly 26 million borrowers had applied for the debt cancellation and more than 16 million were approved.