President Joe Biden is moving forward with another student debt relief plan. 

An estimated 8 million federal student loan borrowers experiencing financial hardship may be eligible to have their loans forgiven — some even automatically — if the regulation is finalized as proposed, the Department of Education announced Friday. 

The proposed regulation is the result of a months-long process known as negotiated rulemaking where the Biden administration worked with stakeholders, experts, advocates and more to develop a plan to deliver debt relief to borrowers facing financial hardship.

The proposal outlines two pathways to debt forgiveness:

• Automatic forgiveness for borrowers who the department determines have at least an 80% chance of defaulting on their loans within the next two years
• Primarily application-based relief for current and future borrowers with demonstrated, persistent hardship

"The rules proposed by the Biden-Harris Administration today would provide hope to millions of struggling Americans whose challenges may make them eligible for student debt relief," Secretary of Education Migel Cardona said in a statement. 

In the coming weeks, the proposal will head to the Federal Register where it will have a 30-day public comment period before it's finalized. The department expects the regulation to be finalized in 2025. 

Here's what borrowers may expect if the proposal is finalized as currently written.

Relief for the 'most at-risk' borrowers

The proposed rule aims to clear unmanageable student debt balances for borrowers facing hardship in order to help those at risk of defaulting on their loans avoid catastrophic consequences.

"This action would authorize relief for many of the most at-risk borrowers," the Biden administration said in a statement. 

When a borrower defaults on their student loans, the entire balance comes due immediately, the borrower's wages can be garnished and their government benefits, and even tax refunds, can be seized to pay back the debt. The default can also further damage the borrower's credit, making it difficult for them to access capital or rent a home in the future. 

By identifying and providing relief to those borrowers before consequences kick in, the Biden administration says will save taxpayer dollars on the money and effort it takes to try to collect on defaulted loans and make it more likely the borrower will focus on improving their situation and contributing to the broader economy. 

The proposal lists 17 factors that may be considered when evaluating whether a borrower is facing hardship that qualifies them for the automatic one-time relief. The list is not exhaustive, but includes items like a borrower's income and loan balance, repayment history and the type of school or program attended.

Some of those factors may be considered when the department assesses borrowers on a holistic basis through the second application-based pathway to relief, but the idea is to provide an option for those who may not meet the qualifications for automatic loan discharge.

"If no other payment relief option exists to sufficiently address the borrower's persistent hardship, the Secretary could waive the loan," the department said.

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