U.S. Education Secretary Miguel Cardona said Friday that new proposed rules could provide student debt relief for nearly 8 million borrowers experiencing “financially devastating hardships.” File Photo by Ting Shen/UPI |
License PhotoOct. 25 (UPI) — The Education Department said Friday it is using new rules to deliver student debt relief to almost 8 million borrowers as they struggle with their loans as well as with financial hardships like high medical costs, childcare costs and natural disasters.
The rules enable loan forgiveness that would waive up to the entire student loan balance if the Education Department “determines a hardship is likely to impair the borrower’s ability to fully repay the loan or render the costs of continued collection of the loan unjustified.”
The student debt relief rules were developed in February 2024.
“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.
He said the Biden-Harris administration student debt relief rules would provide hope to millions of struggling Americans “whose challenges may make them eligible for student debt relief.”
The Education Department said qualifying criteria for relief would include persistent financial burdens like “medical bills, high child care costs, significant expenses related to caring for loved ones with chronic illnesses, or devastating economic circumstances from the impacts of a natural disaster.”
The rules would work along two pathways. The first recognize’s the Education secretary’s authority to grant individualized, automatic debt relief without an application on a one-time basis.
That would be based on a “predictive assessment” using borrower data that the borrower granted relief would have at least an 80% chance of defaulting within the next two years.
The second pathway, according to the Education Department, would be through applications for debt relief “based on a holistic assessment of the borrower’s hardship.”
“The Department would holistically assess whether a borrower is highly likely to be in default or experience similarly severe negative and persistent circumstances,” the Education Department said. “If no other payment relief option exists to sufficiently address the borrower’s persistent hardship, the Secretary could waive the loan.”
The rules being adopted would provide relief now, but also for student loan borrowers for generations to come, according to the Education Department.
Before the rules are finalized, they will first be published in the Federal Register within weeks. After that there’s a 30-day public comment period followed by finalization of the new rules in 2025.
So far the Biden-Harris administration has approved student debt relief for almost 5 million borrowers.
More than 1 million borrowers were approved for relief of $74 billion through the Public Service Loan Forgiveness program.
More than 1.4 million borrowers were approved for $56.5 billion in relief through the Income-Driven Repayment program that uses administrative adjustments.
Over 1.6 million borrowers got $28.7 billion in student debt relief due to cheating by schools, court settlements or because education institutions closed.
Nearly 572,000 borrowers won debt relief approval for $16.2 billion due to total and permanent disability.
