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.
Federal Student Loan Payment Pause: Budgetary Effect and Distributional Impact
In November, the U.S. Department of Education announced another extension of the pause on student loan repayment, interest, and collections (“Payment Pause”) until August 2023 at the latest.
Student loans have been in Payment Pause since March 2020. We calculate the conventional budgetary costs and distributional effects of the current-law Payment Pause between March 2020 and August 2023.
Current Law: All federal student loan borrowers are eligible. Total budgetary costs are estimated to be $210.0 billion with 23% of the benefit accruing to households in the bottom 50 percent of the income distribution.
We also present three alternative policies that would have instead limited the Payment Pause to lower-income households based on different means-tested rules. If implemented in March 2020 and continued until August 2023, we calculate the following results:
Alternative 1: Only Pell Grant recipients are eligible. Total budgetary costs are estimated to be $129.0 billion with 49% of the benefit accruing to households in the bottom 50 percent of the income distribution.
Alternative 2: Only households with income below 2.25 times the Federal Poverty Line are eligible.
Total budgetary costs are estimated to be $60.1 billion with 89% of the benefit accruing to households in the bottom 50 percent of the income distribution.
Alternative 3: Only households with income below 1.5 times the Federal Poverty Line are eligible.
Total budgetary costs are estimated to be $30.2 billion with 100% of the benefit accruing to households in the bottom 50 percent of the income distribution.
White House Build Back Better Framework, Illustrative Permanent Scenario
In order to provide additional context as part of the current reconciliation debate, PWBM has estimated a scenario where all spending and revenue provisions in the Build Back Better Framework are permanent. The table below reflects this alternative. These estimates are neither PWBM’s estimate of any current legislation nor PWBM’s estimates of the Build Back Better Framework released by the White House.
Economic Effects from Preschool and Childcare Programs
By 2051, we find that a combination of targeted preschool and targeted childcare programs increase GDP by 0.1 percent relative to current policy, even if deficit financed. Universal versions of these programs are more costly and would instead reduce GDP by 0.2 percent by 2051. For more information, please see our full analysis.