Biden-Harris Administration Takes Next Steps on Rulemaking to Provide Debt Relief to Student Loan Borrowers Experiencing Hardship

The Biden-Harris Administration today released new proposed regulatory text focused on providing debt relief for borrowers facing hardship on their student loans. In the wake of the Supreme Court’s decision on the Administration's original student debt relief plan last summer, President Biden announced a new path to provide debt relief for as many borrowers as possible under the Department of Education’s existing rulemaking authorities. The text will be discussed as part of a negotiated rulemaking session on February 22 and 23.

The proposal outlines a set of factors that could be used to identify hardship, such as a borrower’s total student loan balance and required payments relative to household income, and whether a borrower has high-cost burdens for essential expenses like healthcare or childcare. The draft specifies that the U.S. Secretary of Education may consider these and other factors to determine whether borrowers are experiencing the type of hardship that would qualify for debt relief.

As one exercise of the Secretary’s authority, the proposed regulatory text would allow for automatic relief for borrowers who are highly likely to be in default in two years. These borrowers would be identified using a methodology developed by the Secretary using information in his possession. In addition to such relief, the proposed regulatory text allows the Secretary to provide additional relief to borrowers experiencing hardship through an application or an automatic process.

“College is meant to lead to a better life, but too many students end up struggling due to their student debt,” said Under Secretary James Kvaal. “The ideas we are outlining today will allow us to help struggling borrowers who are experiencing hardships in their lives, and they are part of President Biden’s overall plan to give breathing room to as many student loan borrowers as possible. It’s an important part of the Biden-Harris Administration’s permanent solutions to the problem of unaffordable loans.”

The current regulatory process builds on the Biden-Harris Administration’s efforts to fix existing loan forgiveness programs and create the SAVE plan, the most affordable repayment plan ever. Through this regulatory process and as part of the broader plan President Biden announced last summer, the Department previously proposed to provide debt relief for other groups of borrowers, including those who:

• Currently have outstanding federal student loan balances that exceed what they originally borrowed.
• Have loans that first entered repayment 20 or 25 years ago.
• Took out loans to attend career-training programs that created unreasonable debt loads or provided insufficient earnings for graduates, as well as borrowers who attended institutions with unacceptably high student loan default rates.
• Eligible for forgiveness under repayment plans like the SAVE Plan or targeted relief programs, or closed school loan discharges, except they have not applied for such relief.

Continuing to provide debt relief and support borrowers

Today’s announcement builds on the Biden-Harris Administration’s track record of fixing the student loan program and providing millions of borrowers the debt relief they need.
This includes the Saving on a Valuable Education (SAVE) plan, which is helping nearly 7 million borrowers manage their monthly loan payments and work toward forgiveness. Of borrowers on SAVE, 3.9 million have a $0 monthly payment, while others are saving an estimated $117 a month (just over $1,400 a year).

This also includes approving over $136.6 billion in relief for more than 3.7 million borrowers through various actions including:

• $45.7 billion for 930,500 borrowers through administrative corrections to IDR payment counts that have brought borrowers closer to forgiveness and address longstanding concerns with the misuse of forbearance by loan servicers.
• $56.7 billion for 793,400 borrowers through PSLF. This includes borrowers who have benefitted from the Biden-Harris Administration’s limited PSLF waiver as well as regulatory improvements made to the program by the Administration. Prior to the Biden-Harris Administration’s fixes to PSLF, only about 7,000 borrowers had ever received forgiveness.
• $11.7 billion for almost 513,000 borrowerswith a total and permanent disability.
• $22.5 billion for more than 1.3 million borrowerswho were cheated by their schools, saw their institutions precipitously close, or are covered by related court settlements.