Biden Gives Another Chance to Cancel Student Loans – Delco Times

Author: COLLIN BINKLEY, AP Education Writer

WASHINGTON — The Biden administration is pursuing a new path to canceling student loans for Americans who struggle with high medical bills, child care costs and other types of financial hardship that prevent them from repaying their loans.

The proposed rule announced Friday is President Joe Biden’s third attempt at student loan cancellation in the face of repeated legal challenges from Republican states. His first plan was rejected by the Supreme Court last year, and his second plan was temporarily halted by a federal judge in Missouri.

The new rule would have to clear a number of hurdles before it could become official, and it’s unclear whether it could be implemented before Biden leaves office in three months. Like Biden’s other loan forgiveness proposals, it could face court challenges from conservatives who say it is unconstitutional and unfair.

If finalized, the new rule would allow the Department of Education to proactively cancel loans for borrowers if the agency determines they have an 80% chance of defaulting on their loans within two years. Others may apply to see if they meet the cancellation criteria.

It is intended to help borrowers who will likely never be able to repay their loans. The Department of Education estimates that about 8 million Americans would be eligible for a recall.

“For too long, our broken student loan system has made it too difficult for borrowers experiencing painful and financially crippling hardship to access benefits, and that is not right,” said Education Secretary Miguel Cardona.

The Department of Education said eligible people include those with unexpected medical bills, high child care costs, high costs associated with caring for relatives with chronic illnesses and those facing financial hardship as a result of natural disasters.

Virginia Foxx, R-N.C., chairwoman of the House Education and Labor Committee, called it a “sham scheme” designed to sway voters ahead of the presidential election.

“This latest egregious voter bribery attempt is a sign of a desperate administration that has squandered an opportunity to achieve meaningful and lasting college cost reform,” Foxx said in a statement.

Under the proposal, the department could use a number of factors to assess whether a person is likely to default on their loans. It includes household income, age, whether they receive public benefits and their total debt – not just student loans.

It also allows for “any other indicators of hardship identified by the Secretary” to be taken into account. A loan is usually considered in default if no payment has been made for approximately nine months.

Cardona says about 1 million borrowers default every year, and the new rules will prevent his agency from collecting money that is unlikely to be recovered.

“The servicing and collection of defaulted loans is not free, it costs taxpayers money,” Cardona said in a call with reporters. “And there comes a point when the cost of trying to collect a defaulted loan is just not worth it.”

The proposal will enter a 30-day public comment period before it becomes official. The administration has said it plans to finalize the rule in 2025. It faces an uncertain future that comes less than two weeks before the Nov. 5 presidential election.

Vice President Kamala Harris, the Democratic nominee, has not detailed her plans to cancel student debt if she wins the presidential election. Republican Party candidate Donald Trump called Biden’s proposals to cancel meetings unfair and illegal.

Biden’s latest proposal is the result of a federal rulemaking process that included experts from across higher education. Advocates have pushed hard for the hardship provision, arguing that too many borrowers are trapped in debt they can never repay.

The Biden administration has said it has authority under the Higher Education Act, which allows the education secretary to forgive debts in some cases. He also noted that other federal agencies routinely waive their debts based on factors such as “good conscience” and equity.

It’s a similar legal argument that justifies Biden’s second attempt at student loan forgiveness, which proposes relief for groups of borrowers, including those with high interest rates and those with older loans. A federal judge in Missouri blocked the plan amid a legal challenge from Republican states.

Biden campaigned for the White House on a promise to cancel new student loans, but his biggest plans have been stalled by Republican opponents. Last year, the Supreme Court rejected a plan to forgive up to $20,000 to millions of Americans after several Republican states sued to block it.

Amid legal battles, the administration has increasingly focused on canceling student loans under existing programs, including one for public sector workers. In total, the administration says it has now canceled $175 billion for about 5 million borrowers.

The hardship provision was originally discussed as part of the second plan, which is currently on hold in Missouri, but the Department of Education split it into its own proposal to spend more time on the details.

Originally published: October 25, 2024 at 15:31