The Department of Education’s loan rule could cost up to $600 billion

The U.S. Department of Education’s proposed rules for student loan forgiveness could cost taxpayers up to $600 billion, far more than the department estimated, according to budget watchdogs.

The Ministry of Education announced another attempt at debt relief for students on Friday. The couple of proposed rulesIf the plan is finalized, it would allow loan forgiveness for about 8 million struggling borrowers. If these rules are finalized as proposed, the Secretary of Education would be able to waive the entire outstanding balance of a student loan when the Department determines that a hardship will likely affect the borrower’s ability to fully repay the loan or increase the cost of continued collection of student loans will decrease. the loan is wrong.

The Committee for a Responsible Federal Budget, a nonprofit budget think tank, said the plan could cost far more over 10 years than the Department of Education’s estimate of $112 billion. The previous one of the group estimation amounted to $600 billion.

“The rules proposed today by the Biden-Harris administration would offer hope to millions of struggling Americans whose struggles could make them eligible for student debt relief,” said U.S. Secretary of Education Miguel Cardona. “President Biden, Vice President Harris and I will not stop fighting to achieve student debt relief and create a fairer, more equitable and more affordable student loan system for all borrowers.”

Maya MacGuineas, chair of the Committee for a Responsible Federal Budget, called the department’s plan irresponsible.

“The Biden administration continues to unilaterally introduce expensive and counterproductive student loan giveaways — but this one is particularly brazen,” she said. “The current rule would grant the Secretary of Education virtually unlimited loan forgiveness authority, setting a dangerous precedent that could lead to perpetual debt forgiveness.”

The proposed rules would create two options for eliminating some student debt.

The first path would recognize the authority of the Secretary of Education to grant individualized, automatic relief without an application. The Secretary could provide relief on a one-time basis to borrowers who the Department determines have at least an 80% chance of defaulting within the next two years.

The second path would allow existing and future borrowers to obtain relief based on an assessment of their hardship. It would be application-oriented. The Department assesses whether a borrower is highly likely to default or experience similar serious adverse and persistent circumstances. If no other payment relief option exists to address the hardship, the Secretary may waive the loan.

MacGuineas said the plan could help address future challenges.

“Today, the Biden administration sent a clear message to schools and borrowers: Charge as much as you want, borrow as much as you can, and let your grandchildren worry about the bill,” she said. “This is no way to run a student loan program or be a good steward of taxpayer money.”