The Department of Education’s lending rules could cost as much as $600 billion

According to budget watchdogs, the U.S. Department of Education’s proposed student loan forgiveness rules could cost taxpayers as much as $600 billion, much more than the department had estimated.

The Department of Education announced another attempt at student debt relief on Friday. Set proposed rulesif finalized, it would provide loan forgiveness to approximately 8 million distressed borrowers. If these rules are finalized as proposed, the Secretary of Education would be able to waive the total balance of a student loan if the Department determines that the hardship is likely to impair the borrower’s ability to fully repay the loan or cause the costs of further collection to be incurred. the loan was unjustified.

The Committee for a Responsible Federal Budget, a nonprofit budget think tank, said the plan could cost much more than the Department of Education’s estimate of $112 billion over ten years. Previous group estimate amounted to USD 600 billion.

“The policies proposed today by the Biden-Harris administration will provide hope to millions of struggling Americans whose challenges may 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 cancel student debt and create a fairer, more equitable and more affordable student loan system for all borrowers.”

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

“The Biden administration continues to unilaterally implement costly and counterproductive student loan handouts, but this one is particularly egregious,” she said. “Today’s legislation would virtually grant the Secretary of Education unlimited loan forgiveness authority, setting a dangerous precedent that could lead to permanent debt forgiveness.”

The proposed rules would create two paths to eliminating some student debt.

The first path would recognize the Secretary of Education’s authority to award individualized, automatic aid without an application. The Secretary may provide one-time assistance to borrowers for whom the Department determines that the risk of default within the next two years is at least 80%.

The second route would enable current and future borrowers to obtain relief based on an assessment of their hardship. It would be of an applied nature. The Department evaluates whether the borrower is likely to default or will experience similarly serious, adverse and persistent circumstances. If no other repayment relief is available to remedy the hardship, the Secretary may waive the loan.

MacGuineas said the plan could help address future challenges.

“The Biden administration sent a clear message to schools and borrowers today: Charge out what you want, borrow what you can, and let your grandchildren worry about the bill,” she said. “This is not the way to run a student loan program or be a good steward of taxpayer money.”