9 months ago
The White House on Thursday unveiled a significant expansion of its plans to cancel student debt as President Joe Biden looks to run on the issue during this year’s election.
The draft proposal released by the Biden administration would empower the Education Department to discharge the student loans owed by borrowers who are experiencing financial hardship and unlikely to be able to repay their debts.
The department proposed a one-time debt relief program that would automatically cancel debt in circumstances where its data suggests that borrowers are at least 80 percent likely to default on their debt within the next two years. The proposal also contemplates applications from individual borrowers experiencing a hardship.
It outlines more than a dozen factors that the administration will use to determine financial hardship, such as household income, total debt balance, history of loan repayment and receipt of a Pell grant. The proposal did not define specific thresholds for those factors.
"We'll leave no stone unturned in the fight to fix a broken student loan system," Education Secretary Miguel Cardona said while unveiling the plan.
The proposal will be debated during a public hearing next Thursday and Friday of a federal rulemaking panel. The Education Department has previously said it plans to officially release the plans for public comment in May.
The latest draft is the most wide-ranging part of Biden’s Plan B strategy for canceling large swaths of student debt in the wake of the Supreme Court’s decision last summer to strike down his first attempt to cancel as much as $400 billion of outstanding debt.
“We are trying to figure out how to be as expansive as possible within the limits of the law and the court decision,” a senior administration official told reporters on Thursday, describing the latest proposal as “quite broad and forward-looking.”
Officials declined to release any specific data about how many borrowers would be covered by the proposal. An Education Department official said only that it would amount to a “meaningful number of borrowers.”
The department’s proposal alludes to the likely legal challenges that will follow from Biden’s next debt relief program. The draft plan says that in cases where borrowers are experiencing hardship and unlikely to repay their loans “the costs of enforcing the full amount of the debt are not justified by the expected benefits of continued collection of the entire debt.”
The latest draft comes after the Biden administration faced months of pressure from Congressional Democrats and student debt activists who were disappointed that a previous round of public hearings did not include a broad category for borrowers experiencing hardship.
The administration has already said it’s looking at canceling debt for discrete categories of borrowers, such as those whose balances have ballooned because of interest or those who attended low-performing academic programs.
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