WASHINGTON (AP) — The Biden administration is moving forward on a new path to student loan cancellation for Americans facing high medical bills, child care costs and other types of financial hardship that prevent them from repaying their loans.

Announced Friday, the proposed rule is President Joe Biden’s third attempt to cancel student loans as he faces repeated hardship. legal challenges Republican states. His first plan was rejected by the Supreme Court last year, and its second plan was temporarily stopped by a federal judge in Missouri.

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

If finalized, the new rule would allow the Department of Education to proactively cancel borrowers’ loans if the agency determines they have an 80% chance of defaulting on their loans within two years. Others might request a review to determine whether they meet the criteria for cancellation.

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

“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,” said Education Secretary, Miguel Cardona.

Those who might be eligible include people with unexpected medical bills, high child care costs, high costs related to caring for loved ones with chronic illnesses and those who have financial hardship following natural disasters, a indicated the Ministry of Education.

Under the proposal, the department could use a series of factors to determine whether a person is likely to default on their loans. This includes household income, age, whether or not they receive public benefits, and their overall debt — not just student loan debt.

It also allows “any other indicator of difficulties identified by the secretary” to be taken into account. A loan is generally considered in default if no payments have been made within approximately nine months.

With about a million borrowers defaulting each year, Cardona said the new rule would prevent his agency from trying to collect money that is unlikely to be recovered.

“Servicing and recovering delinquent loans is not free, it costs taxpayers’ money,” Cardona said in a call with reporters. “And there comes a point where the cost of trying to collect on a defaulted loan just isn’t worth it.”

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

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

Biden’s latest proposal is the result of a federal rules process which included experts from across higher education. Advocates have pushed hard for the hardship provision, saying too many borrowers find themselves stuck with debts they can never repay.

The Biden administration has said it has authority under the Higher Education Act, which allows the education secretary to forgive debt in certain cases. He also noted that other federal agencies regularly forgive their debts, taking into account factors such as “good conscience” and fairness.

This is a similar legal argument used to justify Biden’s speech. second attempt Student Loan Cancellation, which provides relief for groups of borrowers, including those with large interest payments and those with older loans. A federal judge in Missouri blocked the plan following a legal challenge from Republican states.

Biden campaigned for the White House on the promise of further student loan forgiveness, but his biggest plans were halted by Republican opponents. Last year, the Supreme Court rejected a plan to provide up to $20,000 in rebates to millions of Americans after several Republican states sued to block it.

Amid its legal battles, the administration has increasingly focused its attention on its work to cancel student loans using existing programsincluding one for civil servants. In total, the administration says it has forgiven $175 billion for about 5 million borrowers.

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

___

Associated Press education coverage receives financial support from several private foundations. AP is solely responsible for all content. Find AP standards to work with philanthropies, a list of supporters and funded coverage areas on AP.org.

Copyright 2024 The Associated Press. All rights reserved.