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Student loan borrowers facing hardships could have debt forgiven

The Biden administration is considering a new rule that would forgive federal student loans for borrowers who face a high risk of default.
Student loan borrowers facing hardships could have debt forgiven
Posted at 2:28 PM, Feb 15, 2024
and last updated 2024-02-15 14:28:44-05

The Biden administration on Thursday unveiled its latest proposal outlining how it will determine who among millions of student borrowers will be eligible for debt relief.

Under the proposal, the secretary of Education could forgive the remainder of loans for certain borrowers experiencing life challenges that may prevent them from repaying their loans, or borrowers for whom "the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt."

Potential hardships that may be considered include high-cost expenses like health care, taking care of a loved one or housing costs; other factors that may be considered include a borrower’s age, disability, age of the loan, and “the extent to which hardship is likely to persist.”

The Department of Education said it expects this proposal would bring debt relief to borrowers who have at least an 80% chance of defaulting on their loans within the next two years, though officials could not quantify how many people would be impacted or give an estimate on the expected amount of money that would be forgiven.

Thursday's announcement has not been finalized as the proposal still has to go through the rulemaking process. 

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Thursday's announcement represents one of numerous attempts to ease student loan debt burdens on millions of borrowers. Last month, the White House said that student loan borrowers enrolled in the Saving on a Valuable Education (SAVE) Plan who have made payments for at least 10 years and originally took out up to $12,000 will be eligible for full debt forgiveness. Eligible borrowers will have their loans automatically forgiven. 

The White House had its first major efforts to forgive student loan debt for millions of borrowers rejected by the Supreme Court. The initial plan called for the automatic forgiveness of up to $20,000 in debt, depending on a borrower's income. 

"One way we can provide crucial breathing room to those borrowers is to identify hardships, including a borrower's total student loan balance, how much they have to pay compared to their income, and whether a borrower has student loan debt that interferes with paying for basic needs, like getting food on the table, and access to health care for their families," said Education Secretary Miguel Cardona. "This proposal would allow the Department of Education to provide automatic relief for borrowers who are likely to go into default in two years. Keep in mind, a big reason the president has been pushing for student debt relief is to address the over 1 million defaults we've seen annually."

While it's unknown exactly how many borrowers will be impacted by the White House's proposal, a senior White House official said it is aiming toward being "as expansive" as it can be within the confines of the law.

The potential rule could face potential legal challenges, just like previously overturned attempts at student debt forgiveness.

Reporting by Scripps News reporter Haley Bull was used in this report. 


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