Summary: In a July 2023 brief, we estimated that President Biden’s SAVE plan would incur a budgetary cost ranging from $391 to $559 billion over the next ten-year budget window, with a medium estimate of $475 billion. Tables 1a and 1b below present updates of our cost estimate, which includes a shift in the 10-year window by one year along with other changes in the economy over the past 13 months.
- Table 1a presents our cost estimate which is directly comparable to Table 1 presented in our July 2023 analysis. This cost estimate includes an estimate of potential consolidation of the Parent PLUS loans which could eventually become eligible for SAVE plan. We estimate that a fraction of Parent PLUS loans will be consolidated and covered by SAVE. We estimate that the budgetary cost associated with current outstanding loans to be about $172 billion. For future loan cohort disbursement, we accounted for potential behavioral changes such as more community college borrowers qualifying for Title IV student loan programs and student borrowing increasing (see Technical Appendix from the previous analysis). We estimate the total ten-year budgetary cost of the SAVE plan to be between $374 billion to $536 billion, with a medium cost estimate of $455 billion. In our July 2023 analysis, the medium estimate was $475 billion.
- Table 1b repeats the analysis but assumes that Parent PLUS loans are never consolidated and so they never become eligible for SAVE even when it is optimal for parents to do so. This additional cost estimate is provided in response to previous questions we received related to the role of Parent PLUS loans. The budget costs now range from $339 billion to $480 billion, with a medium cost estimate of $409 billion.
