“Due to the increased generosity of the newly proposed IDR plan, future student borrowers have the incentive to increase their federal student loan borrowing,” Penn Wharton junior economist Penlei Chen wrote.
The president’s SAVE plan is expected to go into effect July 1, 2024, and would cut monthly income-based student loan payments in half, eliminate monthly payments for minimum-wage earners and forgive all outstanding debt after 10 years of payments for student borrowers who took $12,000 or less.
Most community college students would not have to pay back any debt under the plan, according to the Biden administration.