Eight million borrowers facing “persistent financial burdens,” such as those caused by unexpected medical bills, natural disasters or high childcare or family care costs, could qualify for federal student loan forgiveness – but it’s still not a done deal.

The Department for Education revealed new details about the financial hardship proposal on Friday, October 25, including eligibility criteria and how borrowers could apply for relief.

“For far too long, our student loan system has made it too difficult for borrowers facing heartbreaking and financially devastating hardships to access help, and it’s not fair,” said the U.S. Secretary of Education, Miguel Cardona, in a statement. statement.

The difficulty proposal is part of President Joe Biden’s Student Loan Forgiveness ‘Plan B’ which is currently facing legal challenges. The president introduced “plan B” in June 2023 after the Supreme Court blocked his original plan to forgive up to $20,000 in student loans. The Department of Education began the regulatory process in October 2023.

The Department for Education aims to complete the plan in 2025, but lawsuits could affect that rollout. The department will formally publish the proposed regulations in the coming weeks. Once published, the public will have 30 days to comment regulations.gov.

“While this is another legal path to student debt cancellation, pushback is anticipated, so it’s critical that we move quickly to provide this much-needed relief,” said Kristin McGuire, executive director of Young Invincibles, a policy organization focused on issues affecting young people, in a statement.

If the hardship proposal goes into effect, borrowers would have two main paths to this student loan forgiveness:

• Automatic forgiveness. If the Department of Education determines that you have at least an 80% chance of defaulting on your student debt within two years, it may automatically forgive your loans, one time. Hardship factors can include income, assets, the type and amount of student debt, and whether you received a need-based application. Pell Grant to pay for school.

• Application-based forgiveness. If you don’t qualify for automatic one-time forgiveness, you can submit an application that holistically assesses how likely you are to experience or experience severe and persistent financial hardship.

“I have so little faith in that forgiveness program that it’s going to happen,” says Stanley Tate, a student loan attorney. “Even if you have what you would think is a pro-pardon president in office, they would still face challenges from groups that have the right to challenge these things.”

On October 3, a federal judge in Missouri temporarily blocked Biden’s “plan B” for student loan forgiveness, which includes this hardship proposal. A group of Republican-led states, including Missouri, Georgia and Alabama, filed the lawsuit in September.

“The latest lawsuit challenges (the Biden-Harris administration’s) third and weakest attempt to write off student loans en masse in the dark of night without letting Congress or the public know about it,” Missouri’s attorney general said , Andrew Bailey, in a statement in September. .

If you’re struggling with student debt right now, consider these existing relief and forgiveness options:

• Income Driven Repayment (IDR) Plans. IDR plans cap monthly federal student loan bills based on income and family size, down to $0. After 20 or 25 years, the remaining debt will be forgiven.

• SAVE process tolerance. The newest federal IDR plan, SAVE is currently facing legal challenges. As a result, borrowers enrolled in SAVE have an interest-free payment break until at least April. If you’re not on SAVE, you can still get this interest-free forbearance if you apply for the plan now. You always have the option to change plans further.

• Delay or forbearance. You can temporarily defer your federal student loan bills by asking your servicer a postponement or forbearance. Deferrals are generally the best option because interest generally doesn’t accrue, but you must meet certain eligibility criteria. If you have private student loans, ask your lender about ways to temporarily reduce or suspend payments.

• Refinancing if you have private student loans. If you have private student loans, your options for help are limited, and you don’t have access to federal student loan forgiveness. Private student loan refinancing to get a lower interest rate, you can lower your monthly payments and the amount you pay overall. However, you can only qualify for the lowest rates shown if you have a solid credit score and finances.