Biden Proposes Canceling Student Loans For Financial Hardships-Here’s Who Could Qualify

Topline
About 8 million student loan borrowers could have their debts forgiven under a new plan to help Americans dealing with “financially devastating hardships,” the Biden administration announced Friday, the latest proposal to reduce student loans as the Education Department defends another plan against legal challenges.
About $175 billion has been forgiven for nearly 5 million Americans during the Biden administration. Getty Images
Key Facts
The new plan, if finalized, would allow the Biden administration to cancel loans for borrowers the Education Department believes have an 80% chance of defaulting on their loans within two years, the agency said. Borrowers can apply for relief under the new plan by showing they have “persistent financial burdens” preventing them from repaying their loans, including unexpected medical bills, high childcare costs, “significant expenses” while caring for loved ones with chronic illnesses or “devastating” economic circumstances from the impacts of a natural disaster. The Education Department said there are 17 “non-exclusive factors” from existing data that would be used to determine whether a borrower would qualify without requiring them to apply for relief, including household income, assets, types and balances of student loans, and debt balances, among others.
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What To Watch For
The Education Department said it expects to finalize the regulations in 2025, though it’s not immediately clear whether they will be finalized before Biden leaves office in January—or whether a new administration would approve them (Donald Trump has also criticized plans to reduce or eliminate balances for student loan borrowers). Other student loan forgiveness proposals have faced court challenges: The administration’s Saving on Valuable Education (SAVE) plan has been temporarily blocked after legal challenges by Republicans-led states that claim the plan is “unlawful” and places a financial burden on the states.
Big Number
$4.5 billion. That’s how much the Biden administration approved in student loan forgiveness earlier this month for more than 60,000 borrowers enrolled in the Public Service Loan Forgiveness Program (PSLF). The PSLF is designed to provide debt relief for public servants like teachers, nurses, social workers, first responders and others who have made 10 years of payments. According to the Education Department, about $175.4 billion has been forgiven for nearly 5 million Americans during the Biden administration.
Key Background
Canceling student loans for those with financial hardships was first proposed in another debt relief plan, but was reportedly broken off to become a new, separate proposal. President Joe Biden initially planned to cancel up to $20,000 in student debt for people with incomes below $125,000, though the Supreme Court ruled Biden had overstepped his authority. The Biden administration considered forgiving loans for borrowers facing financial hardships in a second plan introduced in February, with considerations about whether the borrower has high-cost, unavoidable expenses like childcare or healthcare, the Associated Press reported.
Further Reading
Forbes Biden Approves Another $4.5 Billion In Student Loan Forgiveness—Here’s Who Qualifies