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

President Joe Biden speaks on the student debt relief plan as Secretary of Education Miguel Cardona listens in at the Eisenhower Executive Office Building in Washington, D.C., on Oct. 17, 2022.

The updated guidelines will make it easier for people with student debt to discharge it.

The U.S. Department of Justice and the U.S. Department of Education created the new policy. If the agencies find that the case warrants the discharge of the student debt, they can do so.

It is hard to walk away from federal student debt in a normal bankruptcy proceeding.

Vanita Gupta, associate attorney general of the U.S., said that today's guidance outlines a better, fair, and transparent process for student loan borrowers.

If you have been laid off, the Biden administration could extend the student loan payment pause again.

As the White House battles to defend its student loan forgiveness plan in the courts, an announcement has been made. The Biden administration stopped accepting applications for its program after a judge ruled it was unconstitutional.

The DOJ filed an appeal.

26 million people applied for forgiveness before the education department closed its portal. 10 million borrowers were in delinquent or default before the student debt epidemic hit.

Legal experts and consumer advocates say that the bar for being able to discharge student loans is too high.

Student loan borrowers had to wait at least five years after they began repayment to file for bankruptcy in the 1970s in response to concerns raised by policy makers and pundits that students would rack up a lot of loans and then try to discharge them after graduation. The waiting period was increased in 1990.

People with federal or private student loans are required to show that their debt poses an "undue hardship" in order to discharge it in bankruptcy. Lawyers and advocates say the uncertainty of the term leads to unfairness in the courts.

Powell said that he was at a loss to explain why student loans are treated differently than other types of debt.

According to research published in the Duke Law Journal, fewer than 300 students walk away from their education debt after filing for bankruptcy. The success rate is just 1%.

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