Proposed Hardship Rule a Brazen Attempt at Student Debt Cancellation

Today the Department of Education officially proposed regulations related to cancelling student debt due to “hardship.” It contains two provisions, one that cancels debt for those that the Department determines are at least 80 percent likely to default within the next two years, and one that determines the borrower is in hardship based on 17 “non-exclusive factors” including one factor that the Department describes as a “catch-all” to “preserve the Department’s flexibility” to cancel more debt.

The Department estimates that this rule will cost $112 billion over ten years, assuming their SAVE program is not struck down in court. We believe the actual costs are likely to be many multiples of their estimate. We previously estimated that allowing hardship cancellation could cost up to $600 billion, and the Department has provided no new evidence to fundamentally modify our analysis.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

The Biden Administration continues to unilaterally introduce costly and counterproductive student loan giveaways – but this one is particularly brazen. Today’s rule would practically grant the Secretary of Education unlimited loan forgiveness authority, creating a dangerous precedent that could lead to perpetual debt cancellation.

With many of their previous debt cancellation efforts reversed by or held up in court, this seems like a Hail Mary attempt to let the executive branch do whatever it wants. This rule creates a framework for ongoing cancellations for a broadly-defined group of borrowers, including an admitted “catch-all” provision that could justify just about any debt cancellation.

The Department of Education estimates this rule would cost $112 billion over ten years. But we’ve found the cost could be up to $600 billion. And over time, it could open the door to trillions of dollars of debt cancellation if future Administrations take advantage of its wide scope.

Today the Biden Administration has sent a clear message to schools and borrowers: charge as much as you want, borrow as much as you can, and let your grandchildren worry about the bill. This is no way to run a student loan program or to be good stewards of taxpayer dollars.

There’s no doubt that many borrowers are struggling with the high cost of education. But this policy would only increase the cost and weaken the quality of higher education.

Dangling these one-time fixes that may be struck down in courts anyway is unfair to borrowers as well as to taxpayers.

The Administration should stop this nonsense and work with Congress to create real solutions that address the cost and quality of higher education.

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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.