Student loan forgiveness could put taxpayers on the hook for $500 billion

WASHINGTON (TND) — President Joe Biden has tried to make canceling student loans a pillar of his time in office. The administration’s latest announcement aims to cancel another $7.4 billion of debt mostly by waiving high amounts of accrued interest.

The Penn Wharton Budget Model explains that the new plan and other previous debt forgiveness plans will cost taxpayers big over the next decade. All told taxpayers could be on the hook for $559 billion for the next 10 years, the model projects.

It’s a big middle finger to working-class folks who paid off their loans or didn’t take them out in the first place," said Sen. Eric Schmitt, R-Mo.

Schmitt sued the Biden administration over debt forgiveness in 2022 when he was his state’s attorney general.

The Supreme Court eventually stopped Biden's last debt forgiveness effort. The White House said the new plan uses a different authority to get around the ruling.

“It’s unconstitutional, he has no authority under statute to do it, it was struck down before. I think this is an election year ploy," said Sen. Schmitt.

The $559 billion is equivalent to more than six years of the annual budget of the Department of Education. Even some Democrats admit canceling student loans doesn’t get to the root cause of the high cost of education.

I think the intent is good, clearly, to provide relief of student debt. I think it’s how you go about it I think for many, is troubling, and it needs more work," said Rep. Jim Costa, D-Calif.

If the proposal is finalized, the canceled accrued interest could go into effect as early as this fall and maybe even right around election time. The plan will almost certainly be taken to court.