After months of waiting, the Biden administration on Friday officially unveiled draft regulations for a new student loan forgiveness plan intended for borrowers who are experiencing financial difficulties. The program, if implemented, could allow eight million borrowers to erase their federal student debt.

“For too long, our broken student loan system has made it too difficult to access relief for borrowers facing heartbreaking and devastating financial hardship, and that’s not fair,” the U.S. Secretary of State said Friday. Education, Miguel Cardona, in a press release. “The rules proposed today by the Biden-Harris Administration would give hope to millions of struggling Americans whose hardships could make them eligible for student debt relief. »

However, it is almost certain that the new student loan forgiveness initiative will face legal challenges. And Republican state officials have been successful so far in challenging several other Biden administration student debt relief programs.

Here’s what borrowers should know about the new program.

Who would qualify for student loan forgiveness based on hardship

The new hardship-based student loan forgiveness plan is an expansion of the so-called “Plan B” program the Biden administration revealed earlier this year. The initiative, designed to be a second attempt at massive debt relief after the Supreme Court struck down President Biden’s first attempt last year, would focus relief on four categories of borrowers. That would include those who started repaying more than two decades ago and borrowers whose balances have ballooned due to accumulating interest.

Borrower advocates had pushed for a year for the Department of Education to establish a fifth route to hardship-based relief. The department ultimately did so, but chose to create a separate set of rules and regulations governing this option. On Friday, the department released proposed regulations that would provide two separate paths to hardship student loan forgiveness.

“The first pathway would recognize the Secretary’s authority to grant individualized and automatic relief without a request,” the department said in its report. statement Friday. “The Secretary may provide one-time relief to borrowers who the Department determines, based on a predictive assessment using existing borrower data, have at least an 80 percent chance of defaulting within two next few years.” Officials would consider a number of hardship indicators based on information already available to the department, such as income, student loan types and balances, debt-to-income ratios, and grant recipient information. Pell.

“The second pathway would allow current and future cohorts of borrowers to benefit from relief based on an overall assessment of the borrower’s hardship and would be primarily application-based,” the ministry explains. Authorities would conduct a thorough review of a borrower’s overall circumstances to determine “whether a borrower is very likely to default or is experiencing equally serious negative and continuing circumstances”, particularly if there are no other relief options.

Borrower advocacy groups celebrated the release of the new loan forgiveness plan.

“Finally, eight million borrowers are getting the help they desperately deserve,” Kristin McGuire, executive director of Young Invincibles, said in a statement Friday. “For too long, current and future borrowers have been left behind when it comes to debt burdens. This proposal brings us one step closer to promised broad-based debt relief, with a focus on financial hardship, ensuring that young adult borrowers are not a forgotten group.

New student loan forgiveness plan likely to be challenged

But borrowers may want to temper their expectations, as the plan is widely expected to face legal challenges. The Biden administration has already seen several of its other student loan forgiveness initiatives halted by the courts.

In addition to Biden’s first massive debt relief package being struck down by the Supreme Court last year, a federal court in Missouri has already issued an injunction. block the first part of “Plan B” student loan forgiveness program. A coalition of Republican-led states, led by the state of Missouri, successfully challenged the program before the department even issued effective regulations. The Biden administration is now calling for the lawsuit to be dismissed, given that technically the program doesn’t even exist yet.

Separately, the Biden administration is also facing legal challenges over the SAVE plan, a new income-driven repayment program designed to reduce borrowers’ payments and limit interest accrual. The SAVE plan is now blocked, as is the cancellation of the student loan under several other IDR plans.

Republican lawmakers blasted Biden’s latest student loan forgiveness plan. House Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC) called it another attempt to “shifting responsibility for paying for college from those who took out loans to those who did not,” according to a statement released Friday.

What’s Next in Troubled Student Loan Forgiveness

Nonetheless, the Biden administration is taking the next steps to try to implement the new hardship-based student loan forgiveness plan.

“The proposed regulations will be published in the Federal Register in the coming weeks,” the Department of Education said Friday. “Once the proposed regulations are published, the public will be able to submit comments via the Regulations.gov website for 30 days.”

If the plan is not struck down by the courts, the department hopes to finalize the regulations sometime in 2025 (typically, Department of Education regulations take effect in July). However, if the program survives a legal challenge, its fate will ultimately depend on the outcome of the next national election.