New CBO Estimate Should Send IDR Plan Back to Drawing Board

Student loans may be an individual financial problem, but not a national crisis and not worth more unauthorized debt.

MAR 13, 2023 

The Congressional Budget Office (CBO) estimates the President’s proposed income-driven repayment (IDR) plan for student loans will cost $230 billion over the next decade, nearly $100 billion more than the Department of Education’s $138 billion estimate. The cost will rise to $276 billion – more than twice the Administration’s estimate – if the Supreme Court rules the President’s companion debt cancellation plan to be illegal. We’ve previously shown that the new IDR plan, which is currently going through the rule-making process, is highly problematic and would cost more than advertised. We also submitted comments that made a number of recommendations and suggestions regarding the preliminary rule.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

$230 billion is a massive amount of money, at a time when inflation is surging and debt is approaching record levels. The total cost of the President’s student debt plans may be close to a trillion dollars – and all to be spent without Congressional approval.

Based on CBO’s estimate, the IDR plan is likely to cost $100 billion more than what the White House thought, and could cost twice as much as the Administration found – a whopping $276 billion – if the debt cancellation plan is ruled illegal.

The Administration should go back to the drawing board and work with Congress on a more responsible set of student debt reforms. At a minimum, policymakers should delay implementation of this rule so there is more time to study its implications and more opportunity to consider more sensible alternatives.

While well intentioned, the new IDR plan would transform student debt into a tuition lottery, where debt forgiveness will be widespread and only tenuously related to need. The plan will provide huge windfalls to doctors and lawyers at a huge expense to taxpayers.

As the CBO estimate highlights, the IDR plan will not only cause millions of borrowers to flock to the new repayment plan, but also spur substantial new borrowing, drive up tuition and higher education costs, and support the expansion of low-quality degrees that end up putting students at a financial disadvantage over their lifetimes.

At the high end, the cost of this IDR plan is three times as large as the President’s plan for free community college. In fact, it would cost more than all of the President’s higher education proposals put together, including mandatory funds to help double Pell grants.

This level of spending should not even be considered without an offset plan, let alone enacted through executive fiat.

The President should delay or abandon his current IDR plan and work with Congress on a more comprehensive framework to responsibly support struggling borrowers, reduce higher education costs, and demand accountability for institutions of higher learning.


  1. A big part of the problem is that virtually all high school graduates have been encouraged to attend college. That is a colossal mistake unless we all live in Lake Woebegone where all the kids are above average. Many borrow money and after a year or 2 drop out and owe money for basically wasting time. Some get hooked by for profit education outfits that promise high paying skills but deliver a lot less. They, too, owe for student loans. This was bad policy on the part of adults who should have known better.
    The problem now is Uncle is broke and can’t deliver on loan forgiveness. Uncle can’t deliver on any new spending scheme no matter what Biden wants.


  2. Wrote about the student debt forgiveness program 10+ years ago. Isn’t it the privilege of everyday working American taxpayers like you to pay the student loans of the elites? Worse, people really don’t understand how the system can be gamed. Think of all the folks who would defer the maximum compensation via contributions to tax-qualified plans and IRAs, and select positions with outsidex benefits at the expense of direct compensation (wages) as a means of building up a nest egg that is not considered for debt repayment. Worse, the next iteration will see some consideration of reducing the repayment percentage to 5% of “discretionary income”, with forgiveness of the outstanding balance after 10 years of repayment.

    While enrolled in a graduate law program, in 2011-2013, the dean of my law school forwarded to all students a letter from the dean of Georgetown law school that demonstrated how we private law school students could discharge substantial portions of our exorbitant law school costs on to taxpayers. Anyone who knows basic math (add, subtract), who has no morals, or who is swayed by moral hazard, immediately ran out that day and took every loan and dollar available – to finance a car, home, whatever. All ultimately paid for by me, AND YOU!

    Here is an excerpt from the 2012 memo I received from the dean of John Marshall Law School, purportedly written by Georgetown Law School Dean William Treanor

    TO: Fellow Law School Deans

    RE: President Obama’s New “Pay As You Earn” Student Loan Repayment Plan
    DATE: January 17, 2012

    As the attached memorandum from Professor Philip Schrag of my faculty describes in much greater detail, President Obama recently announced a new initiative through which high-debt, lower-income higher education graduates may obtain a significant amount of federal relief from their student loan repayments. The general idea is that, in the future, graduates will be able to elect a new repayment plan under which, in any given year, their repayment obligations on certain student loans (those that were extended by the federal government, and quite possibly those that were guaranteed by the federal government) will not exceed about 6 2/3 percent of their incomes, regardless of the level of their eligible debts, the amount of their incomes, or whether they are employed in the public sector, work in the private sector, or are unemployed.

    Further, any balance remaining after 20 years of these repayments will be forgiven for borrowers who have not worked for 10 years in the public sector, and after 10 years for those who have worked full time for that period in the public sector. …

    Nevertheless, because the value of the benefit to many of our students will be very great if the regulations do make them eligible for it, our financial aid office is communicating during the next several weeks with every graduating borrower who may be eligible and inviting them to
    replace their 2011-12 loans with separate fall 2011 and spring 2012 loans, in case this turns out to be necessary for eligibility. This will require some administrative work on our part and on the part of the students, but there will be no additional cost to the students who re-sign their paperwork. …

    I therefore urge you to read, and to pass along to your financial aid personnel, the enclosed memorandum by Professor Philip Schrag, who follows this issue and has written extensively on the subject of student financial aid. ”

    Here is an excerpt from my response to my own law school dean, back in 2012:

    I am a student at JMLS. You indicated questions about the program should be sent to you. Please feel free to pass these on to the appropriate individual.

    I have significant concerns about this program. Up to JMLS, however, I would tamp down the marketing of this program – where the majority of the taxpayer-subsidy is allocated to those who spend the most on education to become members of the “privileged” class with graduate law degrees and significant incomes. Using one of the examples in the Georgetown memo, an individual obtains a Georgetown law degree which has a retail cost of $373,800 (including interest, I assume). The new program means she pays $157,877 over the 20 year loan repayment period (earning a salary that starts at $75,000 and, 20 years from now in 2031, is projected to be $131,500). The “government” forgiveness was estimated to be $215,923. She receives a forgiveness of over 58 % of her cost!

    Eight questions:
    First, doesn’t linking the structure to a fixed percentage of “discretionary” income disproportionately subsidize private universities and law schools where tuition, books and fees are
    significantly higher?

    Second, what is magical about 6 2/3% or 10% of “discretionary” income? Isn’t that arbitrary? Why is that a “reasonable” percentage of “discretionary” income, and only for the first 20 years after
    graduation? For comparison, for most Americans, real estate is their top investment – one which regularly involves an allocation of 25+% of wages for 30 years.

    Third, according to the memo, “… discretionary income is defined as the borrower’s adjusted gross income minus 150% of the poverty level for a family of the size of their family. … Under the 2010 reform, all graduates (including those who did NOT go into public service occupations) would be permitted to repay, under IBR, at the rate of 10% (rather than 15%) of discretionary income – thus about 6 2/3% of actual income. …” Doesn’t the use of “discretionary” income which starts with the individual’s “adjusted gross income” skew the value in favor of those who work for employers with generous (perhaps over the top) pension and health care benefits (the value of which is not
    included in AGI), and similarly, doesn’t the use of AGI skew the results for those individuals who are able to defer the maximum to their 401(k), 403(b), 457 and non-qualified deferred compensation
    plans during the 20 year repayment period? What is the rationale for loan forgiveness, at taxpayer expense, for those who do not perform public service? Finally, doesn’t this also encourage individuals who are in the repayment process to forego marriage to avoid incorporating a spouse’s income that would be part of AGI?

    Fourth, doesn’t this encourage all Americans, even those who have sufficient assets to cover the cost of an education, to borrow money? Why is there no “wealth” test here? In other words, take a student who after 15 years has accumulated $250,000 – $500,000 or more through diligent saving via tax-qualified or non-qualified deferred compensation plans – is there some reason why the taxpayers should continue to subsidize her college education costs where half of all Americans do not have access to a tax-qualified or non-qualified savings plan other than an Individual Retirement Account?

    Fifth, I have two nephews who recently joined the Navy – their father remained in the Navy for 20 years and retired. Is it appropriate to spend the above, significant sums of money for an individual who is among the top 25% of all American wage earners, where, in comparison, each of those nephews will receive GI Bill benefits (which is now contributory) that, after 20 years of service, will have a present value of less than 20% of our example law student?

    Sixth, if the individual decides not to work and earn wages for the first 20 years of her post-graduate life (perhaps for those who are self-employed who plow everything back into their business resulting in a minimal AGI), would that mean taxpayers will provide a full college education at no cost to the individual?

    Seventh, is this something America can afford as it runs $1+T in annual deficits?

    Eighth, and most importantly, is this something America’s taxpayers should subsidize given that she will earn more than 50% more than a super-majority of all American taxpayers during the 20 years of loan repayment, and that the remainder of the loan will be forgiven coincident with the point where she reaches her peak earning years (45 – 65+)?

    And, of course, today, we are running $2+ Trillion in annual deficits for as far as the eye can see or the CBO cares to project.

    And, yes, taxpayers paid some of my tuition via the GI Bill – after I volunteered my draft during the Vietnam era – I wore the green for a couple of years. Course, my wages as an E-1 were only about $130 a month in 1971.

    And, yes, that is still an opportunity for those Amereicans who want to have the “Great Uncle” (and his taxpayers) cover their college education costs.


    1. Just another Biden way to but votes. No one held a gun to these students heads to take out student loans. Perhaps they should have got a part time job, or a junior college for 2 years and save some $$.


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