Student Loan Bankruptcy Requirements Needs Change

Submitted by Stafford Patterson on Mon, 02/28/2022 - 1:06pm

Student Loan Bankruptcy Requirements Needs Change

Richard Cordray, chief operating officer for the U.S. Department of Education’s office of Federal Student Aid, told a House panel in October the bankruptcy process doesn't work well and needs to be overhauled.

He said the Education and Justice departments would review policies where people “are forced to go into court, if you can imagine such a thing, and recount how miserable their lives are, in order to beg for some kind of bankruptcy relief and rarely get it.”

"I think that it doesn't work well, and we think that it needs to be reformed and reevaluated, and we are committed to doing that," Cordray said.

But Cordray didn't explain why the government pursues appeals in cases like that of Wolfson's and Wheat's. Government and private lenders regularly appeal when student loans are discharged in cases that aren't settled before trial, according to bankruptcy lawyers and professors.

Meanwhile, student debt continues to grow on a larger scale.

About 43 million borrowers owe about $1.6 trillion, according to Education Department statistics. The Trump administration suspended loan payments in March 2020 amid the coronavirus pandemic, and Biden has extended the suspension until May 1st. But the number of people seeking relief from student loans before the pandemic was enormous, and the debt continues to mount despite the payment moratorium.

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