Hardship Student Loan Forgiveness Plan Hits Key Milestone, But Its Future Is In Doubt

A sweeping new student loan forgiveness initiative based on hardship trumpeted by the Biden administration reached a key milestone this week, bringing the program closer to implementation. But with Donald Trump set to return to the White House in January, it appears increasingly likely that the program may never actually launch.

The Education Department published draft regulations for the new student loan forgiveness program last month. The rule publication triggered a 30-day public comment period, a key administrative step that concluded this week. With the comment period now closed as of Monday, the department can now review the public feedback and publish final regulations for the program in the coming months. But whether that will actually happen remains an open question.

Here’s the latest.

Details On Biden’s Hardship Student Loan Forgiveness Plan

The Biden administration’s hardship student loan forgiveness initiative would provide two different routes to relief for people who are experiencing personal and financial hardships. Many borrowers could receive loan forgiveness automatically if the Education Department determines, based on readily available data, that they are at risk of falling into default on their student loans. Other borrowers could submit an application for relief, which would be decided on a case-by-case basis.

In the draft rules published last month, the department identified more than a dozen factors that could indicate that a borrower is experiencing hardship and, thus, is likely to default. These factors include the borrower’s personal circumstances such as their age or disability status; financial circumstances such as their income, assets, or overall debt obligations; and educational status such as whether they completed their degree or qualified for a federal need-based Pell Grant.

Polarized Comments Submitted For Hardship Student Loan Forgiveness

Comments were submitted both strongly in favor and strongly opposed to the new student loan forgiveness plan.

More than 200 organizations including labor unions, civil rights groups, and student loan borrower advocacy organizations came out in strong support of the initiative in a jointly submitted comment.

“The Department’s proposed hardship rule represents critical progress in the fight to combat the student debt crisis and protect borrowers from the crushing burden of student debt,” said the coalition. “As drafted, the Biden-Harris-Harris Administration’s proposed NPRM would provide much-needed and long-awaited relief to millions of borrowers and their families whose student loan debt is worsening financial hardship and have been left to navigate the mass confusion and chaos that has taken over the student loan system.”

But conservative groups and lawmakers signaled strong opposition to the loan forgiveness proposal.

“The Department lacks any lawful statutory authority to promulgate the Proposed Pule and, if it implemented the rule, the Department would violate the Appropriations Clause of the Constitution by depleting over $100 billion from the public fisc without any appropriation from Congress,” said the New Civil Liberties Alliance in a submitted comment. “The Department should abandon the Proposed Rule.”

“The proposed rule uses the term ‘hardship’ with great ambiguity and proposes to enact a regulation using a 17-factor artificial intelligence data model to determine who automatically receives loan forgiveness,” said Rep. Virginia Foxx (R-NC) in a letter to the Education Department. “Further, it also proposes to open an application process for borrowers to apply for forgiveness due to a hardship by making the Department the arbiter of borrowers’ subjective life circumstances. Like the Department’s two other forgiveness schemes that are under court injunctions, this fourth scheme is likely to face a similar fate for exceeding the Secretary’s authority.”

Trump Administration Could Unwind Student Loan Forgiveness Effort

The Biden administration does not expect to finalize and implement the regulations governing the new hardship-based student loan forgiveness program until 2025. But the incoming Trump administration could simply choose not to move forward with the program, before it gets finalized.

Trump transition officials haven’t publicly commented on concrete plans for the hardship-based student loan forgiveness program. But as Politico recently reported, the incoming Trump administration is looking to rollback several of President Biden’s student loan forgiveness initiatives. This includes several plans that are currently bogged down in legal battles, such as the SAVE plan and the administration’s “Plan B” for student loan forgiveness.

Many observers had expected similar legal challenges to be filed to block hardship-based student loan forgiveness, as well. But lawsuits may not be necessary. Since that program hasn’t even been finalized yet, the Trump administration may have an easy route to block it: simply don’t implement it.