Washington, DC— The Department of Education announced a long-anticipated proposal aimed at providing critical debt relief to millions of federal student loan borrowers facing financial hardship last Friday. The proposal introduces two key pathways for relief, a one-time automatic cancellation for borrowers at high risk of default and an application-based process with a holistic review of borrowers’ economic circumstances. If finalized, this rule will authorize loan forgiveness for approximately eight million borrowers.
The rule accounts for various hardships—including medical expenses, childcare costs and impacts from natural disasters—and empowers the Secretary of Education with the flexibility to deliver relief based on borrowers’ individual situations. It also extends eligibility to Parent PLUS borrowers, borrowers with disabilities and those in default.
“Though critical programs like Income-Driven Repayment, Public Service Loan Forgiveness and forgiveness for closed or low-value schools exist to help borrowers, there are still exceptional circumstances that make it impossible for graduates to repay their student loans,” said Nadine Chabrier, senior litigation and policy counsel at the Center for Responsible Lending (CRL). “Congress recognized this and decades ago gave the Department of Education full statutory authority under the Higher Education Act to forgive debts of individuals. We commend the Department for its transparency and commitment to exercising this authority.”
“By tackling the structural challenges created by student debt, this proposal represents a major step toward reversing the financial hardships that hinder homeownership, entrepreneurship and borrowers’ ability to save for emergencies or retirement,” Chabrier said. “When implemented, this rule will provide a lifeline to millions of borrowers and unlock new economic opportunities for workers and families by addressing one of the most pressing financial challenges of our time.”
The Notice of Proposed Rulemaking (NPRM) will be formally published in the coming weeks, launching a 30-day public comment period to allow borrowers, advocates and other stakeholders to provide input.
The proposed rule comes after persistent advocacy from CRL, consumer and civil rights groups, borrowers and labor organizations demanding a comprehensive solution to alleviate the burden of student debt.
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Press Contact: Vincenza Previte vincenza.previte@responsiblelending.org