President Joe Biden's administration has unveiled new measures targeting financial hardships faced by millions of borrowers, offering potential loan forgiveness to up to 8 million Americans, Newsweek reported.
The proposed rule addresses cases where borrowers are at high risk of defaulting on their federal student loans. The new provision defines financial hardship as the borrower's inability to fully repay the debt or the high costs of enforcing repayment. Borrowers who qualify would see their remaining loans forgiven.
To implement the rule, the Department of Education DOE will use a "predictive assessment" to evaluate each borrower's financial status. This data will inform Education Secretary Miguel Cardona's decisions to dispense one-time relief. Officials say the process is designed to be expedited, with the relief issued "as soon as practicable."
The initiative builds on Biden's broader efforts to address the nation's growing student debt crisis. Since taking office, his administration has canceled $175 billion in federal student loans, benefitting roughly 5 million borrowers. However, many previous attempts at sweeping debt cancellation have faced legal setbacks.
One such effort, the Saving on a Valuable Education (SAVE) plan, remains in legal limbo as challenges wind through the courts. The Biden administration revived older repayment options, including Pay-As-You-Earn (PAYE) and Income-Contingent Repayment (ICR) plans. Both options allow borrowers to work toward forgiveness over a 20- to 25-year period based on income levels.
"The interim final rule ensures the Department can meet its statutory obligation under the Higher Education Act," a DOE spokesperson said. This "stopgap measure reopens enrollment for borrowers in two other repayment plans" while awaiting court decisions on SAVE.
Biden's push for debt relief has drawn sharp criticism from Republican opponents, including President-elect Donald Trump. During a September debate, Trump labeled the forgiveness plans a "total catastrophe" and "unfair" to Americans who repaid their loans.
The Trump administration previously attempted to increase monthly student loan payments from 10% to 12.5% of discretionary income and consolidate repayment options into a single plan. Financial analysts anticipate that a second Trump administration would dismantle Biden's forgiveness initiatives and potentially challenge the legality of remaining plans.
Michael Ryan, a finance expert, suggested that Trump's potential return to office could jeopardize Biden's ongoing efforts. "If Trump regains office, his administration would likely dismantle the SAVE plan and pursue legal challenges to any forgiveness policies still in place," Ryan told Newsweek.
The Biden administration estimates that the new hardship-based waiver could benefit between 2.67 million and 8 million borrowers directly. These individuals often face the greatest challenges in repaying their loans and are most vulnerable to default.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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