Biden student debt plan creates financial disaster loan cancellation

The Biden administration introduced a new proposal Friday to deliver student loan forgiveness to Americans who experience “financially devastating hardships.”

Qualification rules are vague, but examples of a hardship that could make a borrower eligible for the aid include the potential economic ruin caused by a natural disaster, or a massive, unexpected medical bill.

Some borrowers could see the loan relief automatically, while others would likely have to apply for it, an Education Department official told reporters on a call Thursday.

“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,” Education Secretary Miguel Cardona said in a statement Friday.

The announcement was the latest effort by the Education Department under President Joe Biden to cancel people’s education debt.

Biden has forgiven more student debt than any other president in history. But his most ambitious plans have been blocked so far by Republican-led legal challenges.

Under this latest proposed rule, which is almost certain to face more of the same lawsuits, nearly 8 million student loan borrowers experiencing severe hardship could qualify for relief.

The loan cancellation could reach borrowers “with persistent financial burdens that prevent them from repaying their student loans” and for whom the department’s existing aid options don’t fully help, the official said.

The proposed regulations could be published in the Federal Register within weeks. The Biden administration hopes to finalize the policy in 2025.

However, the department’s previous attempts to provide wide-scale student loan forgiveness are currently being blocked by the courts after a wave of GOP-led legal challenges.

The outcome of the presidential election in November will likely also play a role in the fate of these relief efforts.

Former President Donald Trump is a vocal critic of policies to reduce or eliminate the balances of student loan holders. Democratic Vice President Kamala Harris supports the measures.