The Biden administration’s efforts to eliminate student debt for the 46 million Americans who have student loans have failed repeatedly encountered legal roadblocks. Now the Department of Education is rolling out a new plan that could provide debt relief to 8 million borrowers in financial trouble.
The new plan, unveiled Friday, would provide loan relief to about 8 million people with student loans who are in financial need due to other debts ranging from medical expenses to costs resulting from a natural disaster. The Department of Education said the proposed rules will be published in the Federal Register in the coming weeks and that it expects to finalize the rulemaking in 2025.
President Joe Biden made providing debt relief to those with student loans a major policy issue of his 2020 campaign, but… Republican-led states have filed a lawsuit to block many of those efforts, with the Supreme Court in 2023 ruled 6-3 against his plan to wipe out up to $20,000 in debt from millions of borrowers.
At the same time, Americans owe more than $1.7 trillion in student loans, a debt burden that has, among other things, affected their ability to save or buy a home.
“For too long, our student loan system has made it too difficult for borrowers facing hardships, often financial difficulties, to access assistance,” Department of Education Secretary Miguel Cardona said on a call with reporters. “It’s not fair, it’s not right and it’s not who we are as Americans.”
How people would get relief
Under the proposal, borrowers could qualify for the debt relief in two ways. Some people with student loans could get forgiveness without an application, with the Education Secretary offering one-time relief to borrowers who the agency determines have an 80% chance of defaulting within two years, Cardona said.
“A key reason we are fighting for student debt forgiveness is to address the more than 1 million defaults we see annually in the student loan system,” he said.
The second path to loan forgiveness would offer forgiveness after borrowers apply, with the department assessing 17 factors, such as the applicant’s total debt balance, household income and whether student loan payments are keeping them from obtaining basic services like housing or be able to afford health care. .
“Funding a college education should help students climb the economic ladder, not leave them buried in a ditch,” Cardona said.
