As many of our readers know, President Biden’s program that would have eliminated as much as $20,000 of debt in student loans for some borrowers was recently stopped by a federal district court. The U.S. Department of Justice (DOJ) is appealing the decision, but the program is on hold in the meantime – as are the applications that had already been received.
The DOJ, along with the Department of Education (ED), has worked out a plan to help student loan borrowers more easily discharge their debt in bankruptcy. Few student loan borrowers have been able to do this because of the requirement that they show it’s causing “undue hardship.” While members of Congress have been working to change that stringent requirement, they haven’t been able to get the necessary support of its highly divided membership.
What are the changes announced by the DOJ?
An ED representative noted that the department was “determined…to craft clearer, fairer, and more practical standards to guide recommendations for student debt discharges during bankruptcy proceedings.” Associate Attorney General Vanita Gupta said that the new guidance “outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy.” The DOJ will now have a role in reviewing borrowers’ requests to discharge their student loan debt and make a recommendation to the bankruptcy judge.
The various powers that be, in fighting it out over student loan debt, have left borrowers who are mired in debt far after their college days are over in a state of uncertainty and frustration. By having sound legal guidance as you file for bankruptcy, you can help ensure that you get the best possible chance to discharge some of that student loan debt – or at least get into a financial position where you can more easily keep up with that debt.
