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- The Education Department released its proposal to provide student-debt relief to borrowers facing hardship.
- Hardship could include the inability to afford student loans alongside high childcare costs or medical bills.
- The department expects to finalize the proposal in 2025.
President Joe Biden’s Education Department has released another student-debt relief proposal — this time for borrowers facing hardship.
On Friday, the Education Department unveiled its proposal to provide student-loan forgiveness for borrowers experiencing hardship caused by long-term financial disruptions, including high childcare costs, unexpected medical bills, natural disasters, or expenses from caring for a sick family member.
According to the department, this proposal — if finalized — would benefit about 8 million borrowers who meet the hardship conditions. Those borrowers could have some or all of their student-loan balances wiped out if the department determines their hardship impairs their ability to pay back their loan fully.
“For far too long, our broken student loan system has made it too hard for borrowers experiencing heartbreaking and financially devastating hardships to access relief, and it’s not right,” Education Secretary Miguel Cardona said. “The rules proposed by the Biden-Harris Administration today would provide hope to millions of struggling Americans whose challenges may make them eligible for student debt relief.”
This proposal will be published in the Federal Register in the coming weeks. After that, the public will be able to submit comments and offer feedback to the Education Department on the plan.
The department said it expects to finalize the hardship relief in 2025, and a senior administration official told reporters on a Thursday press call that the department cannot comment on how the election will impact any future relief.
If the proposal is finalized, the department said there would be two pathways for borrowers to access the relief. The first pathway would allow the department to automatically cancel a borrower’s student loans if it determines, based on existing borrower data, that the borrower has at least an 80% chance of defaulting on their loans in the next two years.
The second pathway would be application-based; borrowers would submit an application detailing their hardship, and the department would then determine whether forgiving their loan is the proper remedy. Cardona told reporters on Thursday that the department is considering 17 factors to help determine hardship, including household income, a borrower’s repayment history, and whether a borrower has any additional expenses, like housing or healthcare.
This proposal is separate from the Education Department’s second attempt at broader student-loan forgiveness, which is blocked in court following challenges from a group of GOP state attorneys general. However, relief for hardship was discussed during the rulemaking process for the broader relief plan, and some of the involved stakeholders pressed the Education Department to deliver a comprehensive proposal for hardship.
“We have to recognize that having debt in itself is the hardship,” Wisdom Cole, the national director of the NAACP’s youth and college division and a negotiator on the committee, previously told BI. “If you are having to take on student debt, that is the hardship, point blank, period.”
Following pressure from lawmakers and advocates, the Education Department added a fourth negotiation session in February dedicated to discussing student-debt relief for borrowers facing hardship.
Persis Yu, deputy executive director at the advocacy group Student Borrower Protection Center, said in a Friday statement that the proposal “recognizes what Americans from all walks of life have known for decades — too often, higher education does not deliver on its promise of economic mobility and financial stability, and borrowers and their families should not be sentenced to a lifetime of debt as a result.”