The U.S. Department of Education has proposed new rules aimed at providing student debt relief to approximately 8 million borrowers facing financial hardship. These rules, if finalized, would allow the Secretary of Education to waive up to the entire outstanding balance of a student loan when a borrower's ability to repay is impaired or when continued collection is deemed unjustified.
U.S. Secretary of Education Miguel Cardona stated, "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." He emphasized that the proposed rules by the Biden-Harris Administration aim to offer hope to struggling Americans eligible for student debt relief.
The regulations target borrowers with persistent financial burdens who do not benefit from current forgiveness options. Such burdens may include unexpected medical expenses, high child care costs, significant caregiving responsibilities, or economic impacts from natural disasters.
While short-term assistance programs like forbearance can help manage immediate financial disruptions, larger-scale events often lead to prolonged challenges. For some borrowers, these disruptions result in lasting financial difficulties even after initial recovery efforts.
The proposed rules outline two pathways for relief. The first allows automatic relief without an application based on predictive assessments using existing borrower data. Relief could be granted if there's an 80% chance of default within two years due to hardship. Factors considered include household income, assets, and loan balances.
The second pathway involves a holistic assessment of borrower hardship through an application-based process. This approach evaluates whether no other payment relief options adequately address persistent hardships before waiving loans.
These proposals are designed to support generations of borrowers and authorize relief for those most at risk. Approximately two-thirds of those eligible for automatic relief under the first pathway are Pell Grant recipients.
The proposed regulations will be published in the Federal Register soon, allowing public comments for 30 days via Regulations.gov. Finalization is expected in 2025.
In addition to these efforts, the Biden-Harris Administration has implemented measures reducing student debt burdens and enhancing educational opportunities. Notably, they secured a $900 increase in the maximum Pell Grant award and approved significant debt relief actions totaling billions for millions of borrowers across various programs.
