Discharging student loan debt in bankruptcy may soon get easier

On Behalf of | Dec 15, 2022 | Bankruptcy

Americans of all ages who are mired in student loan debt feel like they’ve been on a roller-coaster this year. President Joe Biden’s recently announced student loan forgiveness program, which would have erased up to $20,000 in student loan debt for some borrowers, had already begun taking applications when a federal district court ruled that the president didn’t have the authority to do this. Therefore, it’s on hold — along with millions of Americans’ hopes for debt relief — as the U.S. Department of Justice (DOJ) appeals the decision.

As we discussed in a recent post, student loan debt has been notoriously difficult to discharge in bankruptcy because a person is required to prove that the debt is causing “undue hardship.” Efforts by Congress to make it easier to discharge this debt have stalled.

New guidance from the DOJ

Now the DOJ has coordinated with the Department of Education (ED) to help borrowers unload some of that debt in bankruptcy. Associate Attorney General Vanita Gupta announced that the new guidance “outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy.” The Department of Justice, in consultation with the Department of Education, will review the information provided by the person filing for bankruptcy and determine whether to recommend that the bankruptcy judge discharge the borrower’s student loan debt.

One ED official says, “After decades of inaction in Washington, our Department of Education team was determined to partner with the Justice Department to craft clearer, fairer, and more practical standards to guide recommendations for student debt discharges during bankruptcy proceedings.”

With so much in flux regarding student loan debt and with the recent pause on federal student loan payments ending soon, it’s crucial to keep abreast of what’s happening. Whether you’re considering trying to discharge some of that debt in bankruptcy or focus on discharging your other debt so you can keep up with your student loan payments, it’s important to have sound legal guidance.