In a move to address the pressing issue of student debt, the White House has announced a significant expansion of its plans to cancel outstanding loans. The proposal, released by the Biden administration, aims to empower the Education Department to discharge student loans for borrowers facing financial hardships and likely unable to repay their debts.

Under the draft proposal, a one-time debt relief program would automatically cancel loans for borrowers who have an 80 percent likelihood of defaulting on their debt within the next two years, as indicated by relevant data. Additionally, individual borrowers experiencing financial hardship will have the opportunity to apply for debt relief.

The proposal outlines over a dozen factors that will be considered when assessing financial hardship, including household income, total debt balance, loan repayment history, and eligibility for a Pell grant. However, specific thresholds for these factors have not yet been defined.

Education Secretary Miguel Cardona, while unveiling the plan, expressed determination to address the flaws in the student loan system. "We'll leave no stone unturned in the fight to fix a broken student loan system," Secretary Cardona stated.

The proposal is set to be debated in a public hearing on Thursday and Friday of next week by a federal rulemaking panel. The Biden administration intends to officially release the plans for public comment in May, following the hearing.

This draft proposal is part of President Biden's broader strategy, known as Plan B, to cancel a substantial amount of student debt after the Supreme Court's decision last year that struck down his initial attempt to cancel up to $400 billion of outstanding debt. The latest proposal is described by an administration official as "quite broad and forward-looking" within the constraints of the law and court decision.

The exact number of borrowers who would be covered by this proposal has not been disclosed by officials. However, an Education Department representative has stated that it would include a "meaningful number" of borrowers.

Notably, the proposal acknowledges the potential legal challenges following the implementation of the next debt relief program. It states that in cases where borrowers are experiencing hardship and are unlikely to repay their loans, it is not justified to enforce the full amount of the debt considering the expected benefits of continued collection.

This latest development comes after pressure from Congressional Democrats and student debt activists, who expressed disappointment that a previous round of public hearings did not sufficiently address the needs of borrowers facing financial hardships.

The Biden administration has already expressed an intention to explore debt cancellation for specific categories of borrowers, including those burdened by inflated balances due to interest or those who have attended underperforming academic programs.