President Joe Biden’s latest debt relief plan would benefit eight million people if passed, but the plan will likely face legal challenges and may never see the light of day.

The long-awaited proposal, released Friday and intended to help financially struggling borrowers, is the latest piece in the Biden administration’s second attempt to relieve student debt for millions of Americans. The first effort, which would have benefited 43 million borrowers, was invalidated by the Supreme Court in June 2023, pushing the president to go back to the drawing board.

The new plan builds on the administration’s proposal released earlier this year This provides a path to relief for borrowers who owe more than they originally borrowed or who have spent more than 20 years repaying their loans, among other groups. As part of this plan, which is not yet final and waiting in courtthe department would cancel all or part of the student loans of nearly 28 million Americans.

But proponents of debt relief have repeatedly supported that the plan was incomplete without a catch-all measure to help borrowers experiencing financial difficulties. Department officials said the plan is crucial because no one should worry so much about student debt that they give up on pursuing a college education altogether.

“The whole point of taking out a student loan in the first place is to invest in the future, to invest in skills and education in order to expand opportunities and move forward, not to fall into the trap of debt when difficulties arise,” the national agency said. economic advisor Lael Brainard said Thursday during a press call. “When hardships arise, student debt relief is unequivocally good for borrowers (and) good for economic opportunity.” »

As with previous iterations of the debt relief plans, criticism of the proposal was swift and forceful, with conservative advocacy groups and congressional Republicans decrying it as nothing more than a third attempt at blame-shifting. regarding reimbursement. Supporters of the proposal applauded the Biden administration for proposing new avenues for pardons and standing up to Republicans.

The ministry plans to publish the proposed regulations in the Federal Register “in the coming weeks,” according to a ministry statement, and will then receive public comments for 30 days. After that, department staff must review and respond to each comment before issuing a final rule.

Officials did not say last week when they hoped to release the final rule, but time is running out. The department has until the end of January to finish its work before a new administration takes over after next week’s election. Any rules issued in the final days of the Biden administration could be reversed by former President Trump, if he wins, or by Republicans if they control Congress, depending on when the regulations take effect.

“This president has made clear that, within the department’s legal authority, his directive to his administration is to provide as much as possible to as many people as quickly as possible,” a senior administration official said asked about the finalization date.

How the plan works

The hardship proposal would grant the department the ability to forgive the entire outstanding balance of a student loan when a borrower faces unexpected expenses, such as medical bills, high child care costs, caring for loved ones with chronic illnesses or a natural disaster. this could harm their ability to repay the loan in full.

“Over the past month, we have seen devastation people can face disasters like Hurricane Helene and Milton hits,” Brainard said. “Families are losing their homes, possessions are being destroyed, small businesses are closing, and thousands are facing new medical bills. Paying off student debt simply shouldn’t be an added burden.”

Borrowers could access relief through two pathways, as outlined in the proposed regulations.

The first would allow the department to provide one-time automatic relief to borrowers who have an 80 percent chance of defaulting on their loans within the next two years. The department would consider 17 factors in making this decision, including a borrower’s outstanding balance as well as whether they have completed their education or are receiving means-tested public benefits, among others. Eligible borrowers could have all of their loans canceled, or the department could choose to discharge only a portion of the outstanding balance.

Two-thirds of borrowers eligible for relief under the first pathway received the Pell Grant, according to the release.

The second route is less formal and requires borrowers to apply for relief. As part of this process, the ministry will conduct an overall assessment to determine whether a borrower is likely to default or “experience equally serious negative and continuing circumstances,” according to the release.

“If no other payment relief option exists to sufficiently address the borrower’s continuing hardship, the Secretary may forgo the loan,” the officials wrote.

Combining the two paths, the latest relief package is expected to cost taxpayers $112 billion over 10 years, according to the proposed regulations. The Commission for a Responsible Federal Budget estimated the plan will cost approximately $600 billion. Department officials argued there would be money to be saved if the agency stopped trying to collect on loans that are unlikely to be repaid in full.

“One of the main reasons we are fighting for student debt relief is to address the more than 1 million defaults we see each year in the student loan system,” the secretary said Thursday to Education, Miguel Cardona, during a press call. “Remember, servicing and recovery of delinquent loans is not free. This costs taxpayers money and can hurt borrowers. And there comes a point where the cost of trying to collect on a defaulted loan just isn’t worth it anymore.

Divided reactions

Kyra Taylor, an attorney at the National Consumer Law Center who was part of the negotiating committee, echoed Cardona’s comment in a statement, saying the current student loan system is broken and that debt relief will allow the government federal government to be better managers in the future. .

“The student loan system is full of debt that will never be repaid, and continued efforts to collect on these bad debts endanger the Department of Education’s ability to adequately service the remainder of the student loan portfolio,” he said. she declared. “This proposal creates a path to ensure that student loan borrowers do not languish under the weight of their student debt in the future.”

Other advocates, including the Student Debt Crisis Center and Young Invincibles, an advocacy group focused on amplifying the voices of young adults, have said higher education should be a bridge to equitable opportunity and that cost does not should not be a barrier before or after graduation.

“​​The new rules recognize that student debt is not just about past borrowers, it is also about protecting future generations,” Kristin McGuire, executive director of Young Invincibles, said in a statement.

But others, including conservative think tanks and congressional Republicans, say the restrictions on what constitutes hardship are vague and that the latest plan simply shifts repayment responsibilities.

“Where is the forgiveness for the man who didn’t go to college but works to pay off the loan on the truck he takes to work? What about the woman who paid off her student loans, but is now struggling to pay her mortgage? asked Dr. Bill Cassidy, Louisiana Republican and ranking member of the Senate Education Committee. “Is the administration providing them relief? Of course not.”

The Cato Institute’s Center for Educational Freedom, part of a libertarian think tank, noted that past debt relief plans have faced “enormous” constitutional and legal challenges, and that this plan is likely to do so as well.

“The most notable feature of this plan involves the Department of Education proactively canceling debt for borrowers it believes will be unable to repay their student loans. But that just begs the question: If the department can predict which loans will default, why is it granting those loans in the first place? » said Neal McCluskey and Andrew Gillen, director and fellow of the center, respectively. “In any other context, making loans that have a high probability of never being repaid is called predatory lending. »