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Biden student loan forgiveness plan: Administration reveals who may qualify

President Joe Biden speaks about his economic plan at the Flex LTD manufacturing plant on July 6, 2023 in West Columbia, South Carolina.
Sean Rayford | Getty Images

The Biden administration has released its proposal for which struggling borrowers should qualify for its new student loan forgiveness plan.

The Supreme Court’s conservative majority blocked President Joe Biden’s first aid package last year. In an effort to create a loan forgiveness program that is legally viable, the Biden administration is working to narrow the relief by focusing on certain groups of borrowers, including those with balances greater than what they originally borrowed and students from schools of questionable quality.

Its new proposal concerns borrowers experiencing financial hardship, the category that has remained the most vague.

The U.S. Department of Education outlined on Thursday a set of factors that could identify struggling borrowers, such as those with student loan balances and required payments that are unreasonable relative to their household income, and people with high childcare and healthcare expenses. It also said that financial hardship could be based on other debt obligations, disability, or age, among other factors.

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“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,” Department of Education Undersecretary James Kvaal said in a statement.

At one point, it seemed possible that the “financial hardship” category had been dropped from what has become known as Biden’s Plan B for student loan forgiveness. While Biden first attempted to cancel student debt through an executive order, he has now turned to the rulemaking process.

Over three rulemaking sessions, the negotiators tasked with determining who will be eligible for the president’s revised relief plan identified several categories that could signal hardship. Those include borrowers who received a Pell Grant or qualified for a health insurance subsidy on the Affordable Care Act’s marketplace.

But the Education Department did not include language on borrowers in hardship in its relief proposal, and the negotiators didn’t get to vote on the category.

Shortly after the rulemaking sessions, lawmakers including Sen. Elizabeth Warren, D-Mass. and Rep. James Clyburn, D-S.C., wrote to U.S. Secretary of Education Miguel Cardona on Jan. 24., pressuring him to still consider struggling borrowers for relief.

“We are concerned that, without full consideration of cancellation targeted toward borrowers facing financial hardship, the rule will not provide adequate debt relief for the most vulnerable borrowers,” the lawmakers said.

The Biden administration seems to have heard those worries. The Education Dept. said it will hold an additional rulemaking session on Feb. 22 and Feb. 23, during which the negotiating committee will focus exclusively on financially strapped borrowers. Its own proposal suggests the category could cover millions of Americans.

This is breaking news. Please check back for updates.

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