Student loan deal could cost $900B and favor top earners, analysis shows

Penn Wharton: Majority of student loan debt forgiven would boost top earners

Penn Wharton estimated that a one-time forgiveness of $10,000 per borrower would cost about $300 billion if the policy is limited to individuals with incomes less than $125,000. The cost jumps to $330 billion if the program continues over the next decade and would cost $344 billion if the White House scrapped the income limits. Should Biden opt to wipe out $50,000 per borrower, it would cost the federal government roughly $980 billion, according to the analysis.

Canceling debt would also add to the nation’s already ballooning national debt, which surged to a record-high $30 trillion last year.

Between 69% and 73% of any debt forgiven would accrue to households that are in the top 60% of income distribution in the U.S.

Critics, including former Treasury Secretary Larry Summers, have argued that putting more money back into borrowers’ pockets could keep inflation painfully high in the coming months and years.

“I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases,” Summers, a Harvard University professor, wrote in a series of tweets this week.

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