The U.S. Department of Education said on Oct. 25 that new a set of rules, if finalized, would cancel student loan debts for about 8 million borrowers facing “financially devastating hardships,” even as a court order blocks its implementation.
The Education Department defines hardship as an event or situation “likely to impair the borrower’s ability to fully repay the loan or render the costs of continued collection of the loan unjustified.” Examples of eligible hardships include unexpected medical bills, high child care costs, caregiving expenses for chronically ill family members, or severe financial losses from the impact of natural disasters.
Under the proposal, borrowers with eligible hardships would have two paths to the bailout. In the first, the Education Department could provide a one-time debt cancellation to those it believes have an 80 percent chance of defaulting on their loans within two years. The department said it will use 17 “non-exclusive factors” such as household income, assets, debt balances, and required payments relative to household income, to determine whether someone automatically qualifies….