Biden Administration Floats Student Loan Relief for Borrowers Facing Hardship

The proposal, which faces tough legal prospects, would offer forgiveness to millions of borrowers who are unable to pay back their loans because of financial setbacks.

The Biden administration has proposed another student debt relief plan for eight million people who cannot repay their loans because of “financially devastating hardships,” Miguel A. Cardona, the secretary of education, said on Friday.

The proposal, which will almost certainly face legal challenges, builds on the administration’s strategy of finding new ways to reduce student loan debt after the Supreme Court last year rejected a far more ambitious, $400 billion plan for as many as 45 million borrowers.

Under the proposed regulation, the secretary of education would be authorized to cancel federal student loans in cases where the Education Department determined “a hardship is likely to impair the borrower’s ability to fully repay the loan or render the costs of continued collection of the loan unjustified.”

Such a hardship could include things like surprise medical bills, burdensome child care or elder care costs and financial losses from a natural disaster, the department said.

“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,” Mr. Cardona said in a statement.

While the Biden administration has approached student debt as a national economic problem for the country and tried to achieve major cancellation through a variety of targeted programs this year, legal challenges brought by Republican states have repeatedly succeeded in blocking the plans, arguing that they exceed the Education Department’s authority under the law.

If implemented, the provision offers two paths for loan forgiveness.

In one, the department could automatically cancel loans for borrowers it determined had at least an 80 percent chance of defaulting within the next two years, based on the department’s analysis of borrower data. That analysis would be based on 17 factors including household income, assets, total debt balances and federal student aid awards received, among others.

In the other, borrowers would need to apply for their debt to be waived, documenting the cause of their hardship and submitting their financial information for “holistic assessment” by the department.

As with previous student debt plans this year, the policy will be subject to review and public comment after it is published in the Federal Register coming weeks. The department said it aimed to have the plan finalized next year.

But the proposal faces a highly uncertain future as challenges brought by Republican attorneys general this year have generally succeeded in blocking student debt plans brought about through that rule-making process.

Earlier this month, a federal judge in Missouri preemptively blocked a similar rule that would authorize some amount of forgiveness for borrowers on decades-old loans, intervening even before the proposed regulation was finalized.

Opponents of the president’s vision for expansive student debt cancellation described the plan as a last-ditch attempt to increase the population of borrowers who would legally qualify for forgiveness after previous attempts fizzled out.

“Once again, Joe Biden and Kamala Harris are defying the Supreme Court and Congress to unilaterally enact their student loan schemes that transfer debt from those who willingly took it on to Americans who chose not to go to college, paid their way through school or fulfilled their commitment to pay their loans off,” Senator Bill Cassidy of Louisiana, the ranking Republican on the Health, Education, Labor and Pensions Committee, said in a statement on Friday.

Education officials said the plan promised fair insurance against unforeseen forces that could push struggling borrowers behind on their payments — a possibility highlighted by the economic devastation caused by Hurricanes Helene and Milton this year.

Despite the legal headwinds the proposal already faces, student advocacy groups applauded its vision, citing the high costs of college education and the psychological and financial weight that large student debt loads can have on borrowers.

“This 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,” Persis Yu, the deputy executive director of the Student Borrower Protection Center, said in a statement.

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