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Just days before the election, the Biden-Harris administration has rolled out yet another plan to cancel student debt—this time aiming to clear the loans of millions of borrowers across the U.S. who are experiencing “hardship.”

The timing is notable: With a hefty portion of young voters carrying student debt, some might say this is a strategic move to energize them just in time for Election Day.

Under a proposed rule published in the Federal Register on Thursday, the Department of Education presents two new routes for student loan cancellation.

The first would allow a one-time review of federal loans, canceling debt for borrowers with an 80% chance of defaulting on payments within two subsequent years.

The second option would open an application process where borrowers experiencing “hardship” could apply for cancellation. What qualifies as “hardship”? The rule lists 17 factors, from income and debt balances to broader categories, such as assets.

If the Education Department decides a borrower qualifies, their debt could be canceled.

This proposal raises serious questions about responsibility, fairness, and financial impact. Let’s examine a few major concerns:

Existing Options Are Already in Place: Federal borrowers already have tools, such as forbearance or deferment. Depending on their situation, they could temporarily postpone or reduce their monthly payments. Borrowers can request forbearance due to financial difficulties, medical expenses, or a change in employment, among other reasons, pausing monthly payments for up to 12 months, with a cumulative limit of three years.

Alternatively, deferment options cover scenarios from cancer treatment to military service to economic hardship, among other options, and during that time, payments would stop temporarily. If borrowers can already adjust payments during hard times, why introduce yet another debt-cancellation pathway?

Consider, too, that from March 2020 to August 2023, student loan payments went into administrative forbearance, meaning all payments were paused, and interest was set at 0%. This pause alone added nearly $208 billion to the national debt because of interest that was waived.

When payments resumed, the Department of Education implemented a 12-month “on-ramp” until Sept. 30, free from credit reporting consequences or default status for missed payments.

It raises the question: Haven’t borrowers already received substantial relief?

A Subjective Hardship Clause: Room for Moral Hazard? Among the proposal’s 17 hardship indicators is a vague clause granting the secretary of education authority to consider “any other indicators of hardship.”

As The Wall Street Journal observed, this could allow “high auto-loan or credit-card payments” to qualify as a hardship. This latitude risks creating a “moral hazard,” signaling to borrowers that loans can be taken without ultimate accountability.

Taxpayer Costs and the Consequences for Non-Borrowers: The proposed rule could come with a staggering price tag. The Department of Education estimates a cost of $112 billion over 10 years. However, the Committee for a Responsible Federal Budget suggests it could be closer to $600 billion—a burden that would land on taxpayers.

And consider this: Even for defaulted loans, recovery efforts typically yield around 80 to 85 cents on the dollar, even after collection costs. This means that, with collection efforts, a significant portion of loans could be recouped rather than off-loaded onto taxpayers. Yet, with outright cancellation, taxpayers absorb the cost entirely.  

Further, this plan sidesteps the underlying issue: Why are college costs soaring at nearly double the rate of inflation? Rather than addressing root causes, canceling debt encourages universities to keep tuition high, as students and institutions know taxpayers might pick up the tab.

Historically, every dollar added to the federal student loan subsidies has driven tuition up by about 60 cents.

With the public comment period opening soon, Americans will have 30 days to weigh in on this plan. Depending on who is elected, it could be finalized by mid-2025.

Whether it withstands judicial scrutiny is yet another open question, with courts having blocked cancellation based on this rule because the department had tried to enforce it before it was even finalized.

The administration’s previous attempts to cancel student debt have repeatedly hit legal roadblocks. Will this proposal, too, face the same fate?