The U.S. Department of Education has announced a proposal to expand student debt relief, potentially impacting 8 million borrowers facing significant financial challenges. The proposed regulations would empower the U.S Secretary of Education Miguel Cardona to forgive loans for borrowers whose financial hardships impede their ability to repay, or when collection costs outweigh benefits.
Cardona emphasized the proposal’s role in addressing inequities in the current loan system.
“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,” Cardona said in a news release, emphasizing the proposal’s role in addressing inequities in the current loan system.
The proposal outlines two pathways to relief. The first would grant automatic, one-time forgiveness for borrowers with an estimated 80% likelihood of defaulting in two years. Using data-driven criteria — such as income, loan type, debt-to-income ratios, and Pell Grant status — the Department would assess hardship levels and preemptively waive qualifying loans.
The second pathway would offer an application-based option for current and future borrowers facing persistent financial hardship. This process would consider a range of hardships, including medical bills, high caregiving costs, and disaster-related expenses. Borrowers who lack sufficient relief through existing programs could have their loans waived based on a holistic evaluation of their financial situations.
These proposals come on the heels of previous Biden-Harris administration actions, which include loan forgiveness totaling $175 billion for various groups, such as public servants, low-income individuals, and borrowers with disabilities. Once published in the Federal Register, the public will have 30 days to comment, with finalized regulations expected in 2025.
