Forget the $10,000, it’s Biden’s repayment plan that’s the killer.

Great analysis by William Gsldton  in today’s WSJ
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Galston writes:

A largely neglected dimension of Mr. Biden’s order changes to the program allowing borrowers to repay their loans as a percentage of their discretionary income over a fixed period (“income-directed repayment,” or IDR).

That provision might prove even more consequential (than the $10,000 loan forgiveness).

The president has:

  • Increased the amount of annual earnings not counted as discretionary income by about $30,000
  • Reduced monthly payments from 10% to 5% of what does count as discretionary income
  • For borrowers with original loan balances of $12,000 or less, Biden has reduced the repayment period from 20 years to 10
  • For borrowers whose payments are too small to cover interest as well as principal, the unpaid interest will no longer be added to the loan balance.
  • At the end of the 10 years, the loan balance is written off.

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The results will be dramatic.

The average starting salary for students with two years of community college is less than $35,000.

That means that loan payments will be based on only $5,000 of discretionary earnings.

So, the monthly payment is less than $25, including interest.

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So what?

“Through the back door, the president will come close to fulfilling his promise to make the first two years of community college free, and almost all borrowers in this category will be debt-free after 10 years.”

That may be a good thing, but…

The repayment plan applies to all students (current and future) with Federal loans,

Accordingly, the Penn-Wharton model suggests that this feature of the president’s program could cost as much as $450 billion over the next decade.

That’s more than the estimated cost of the $10,000 loan forgiveness … and raises the total cost of Biden’s program to a trillion dollars.

All with the stroke of a pen…

Ouch.

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Flashing back, Galston noted that his 1963 annual tuition at Cornell was $1,700 … and that students attending Ohio State were grousing about paying $375 annually.

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