Biden quietly unveils new student loan cancellation plan estimated to cost $121 billion in closing days of election

After the first three attempts were blocked by the courts, President Biden’s administration is quietly unveiling another multi-billion dollar student loan cancellation plan in the final days of the election season.

The Education Department issued a proposal on October 31, without much fanfare, that would “specify the authority of the Secretary to forgive all or a portion of all debt owed to the Department of Student Loan Forgiveness based on the Secretary’s determination that a borrower has experienced hardship or experience in connection with such loan.”

The public has 30 days to comment on the proposal, after which the Department of Education will weigh whether to change or finalize the rule, a process Forbes notes could continue beyond Inauguration Day.

While there were few details on what constitutes a “hardship” that could result in a student loan being canceled, the proposed rule identifies two “hardships”:paths‘ that the department should think about.

The first option requires no action on behalf of the borrower. Under this process, known as a “predictive assessment,” the Secretary of Education would have to decide that a borrower’s loans are “at least 80 percent likely to default within the next two years.” In that case, the department would “provide immediate relief by granting waivers to eligible borrowers, without requiring any action from those borrowers.”

The other option would be after a “holistic review” of a borrower’s “circumstances that meet the proposed hardship standard for (a) waiver” after requesting review.

“A borrower would be eligible for relief if, based on the Department’s holistic assessment, the Department determines that the borrower is highly likely to default or experience similarly severe adverse and persistent circumstances, and that other options for payment relief would not adequately address the problems. the borrower’s continued hardship,” the proposed rule said.

A list of ‘predictors’ provides some examples of what factors would be used to determine if a borrower is facing hardship, such as the total outstanding loan amount, the types of loans held, the repayment plan the borrower is enrolled in, their age and adjusted gross income. However, the list is described as ‘non-exhaustive’.

The Department of Education says the rule would “create benefits for borrowers by removing the hardships they face on their loans, allowing them to better afford the necessities of life.”

It estimates the total plan would cost $121 billion, with the automatic cancellations costing $70 billion and the second path of emergency aid costing $41 billion.

The latest proposal comes as Mr. Biden’s administration has done cancelled more than $175 billion in student loan debt, affecting approximately 5 million people through various debt relief programs.

His previous debt forgiveness plan was knocked down by the Supreme Court in 2023. It would have canceled up to $20,000 in student loan debt, and it was estimated that the plan would cost $400 billion.

After that statement, Mr. Biden did the same bragged that the Supreme Court “tried to stop me from forgiving my student loans,” but that it “didn’t stop him.”

If the latest rule becomes permanent and Vice President Harris wins the White House on Nov. 5, the rule will likely face legal challenges, just like Mr. Biden’s other student debt plans. And if President Trump wins the election, it’s possible his administration will quash the plan.