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“Hardship” proposal

In the wake of the Supreme Court’s decision to stamp down his original student debt relief plan last summer, President Biden has unveiled a string of targeted debt cancelation programs for specific groups of Americans.

This latest plan could have a very significant impact, depending on how the Department of Education chooses to define financial “hardship.”

In the proposed regulatory text — which is due for a debate in a rulemaking session on Feb. 22 and 23 — several factors are outlined that could be used to identify “hardship,” such as:

  • A borrower’s relative loan balance and payments compared to their total income;
  • If a borrower has high-cost burdens for essential expenses like health care or child care;
  • Borrowers who have seen their loans grow larger because of snowballing interest; and
  • If a borrower is considered highly likely to be in default in two years.

The text also specifies that the U.S. Secretary of Education may consider other factors to determine if borrowers are experiencing a type of hardship that would qualify for debt relief, but it does not elaborate on what those additional factors may be.

As a result, the White House could not give an estimate for how many Americans might be eligible for relief if this regulation is approved.

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$4.9 billion debt wiped out

This drive for a fresh batch of student debt relief comes shortly after Washington canceled another $4.9 billion in student loan debt for an additional 73,600 borrowers.

That debt relief was made possible through fixes to the income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF) — programs President Biden described as “broken” and “preventing borrowers from getting relief they were entitled to under the law.”

It will wipe out $3.2 billion of student debt held by 43,900 teachers, nurses, firefighters and other people who have given 10 years of public service. It will also cancel $1.7 billion in debt held by 29,700 borrowers who have been in repayment for at least 20 years but never got the relief they earned through income-driven repayment plans.

So far, the Biden-Harris administration has forgiven $136.6 billion in student loans for more than 3.7 million Americans. That total could balloon if this “hardship” proposal is passed — but it will need to make it through the rulemaking process and any legal challenges before any additional relief could be dished out.

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.


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