Biden administration to make it easier for student loan borrowers to discharge debt in bankruptcy

Submitted by Anonymous (not verified) on Fri, 11/18/2022 - 10:49am

Biden administration to make it easier for student loan borrowers to discharge debt in bankruptcy

he Biden administration on Thursday released new guidelines that will make it easier for economically distressed student loan borrowers to discharge their student debt in bankruptcy proceedings.

The new bankruptcy policy comes from the U.S. Department of Justice and the U.S. Department of Education, and allows federal student loan borrowers to prove that they’re experiencing financial distress requiring a fresh start. Under the rules, the agencies may recommend that a bankruptcy judge discharge a borrower’s student debt if they find their case warrants it.

The announcement comes as the White House is battling to defend its sweeping student loan forgiveness plan in the courts. The Biden administration stopped accepting applications for its program, which would cancel up to $20,000 in student debt for tens of millions of Americans, last week after Judge Mark Pittman of the U.S. District Court for the Northern District of Texas called the policy “unconstitutional” and struck it down.

Under the current system, which the administration described as unnecessarily burdensome, the federal government often delves into borrowers’ financial history to show they haven’t demonstrated their economic hardship.

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