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Elizabeth Warren called on the Justice Department to restore bankruptcy protections for student-loan borrowers.
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Borrowers currently have to prove a difficult standard in court to get rid of their debt.
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Biden’s administration has promised reform, but the process continues to be slow-moving.
Massachusetts Sen. Elizabeth Warren is renewing the call to restore bankruptcy protections for student-loan borrowers.
Last week, President Joe Biden took a major step in providing relief to millions of borrowers by announcing up to $20,000 in student-loan forgiveness for those making under $125,000 a year. While that relief is expected to wipe out balances for 20 million borrowers, the majority will still have debt balances that some might seek to discharge in court through bankruptcy. But doing so has historically been very difficult, and Warren wants Attorney General Merrick Garland to ensure bankruptcy becomes a viable route to providing relief.
“To support the administration’s efforts to overhaul the student loan system and ensure that bankruptcy relief is a viable option for borrowers in severe financial straits, it is critical that you issue and implement this updated guidance without delay,” Warren wrote in a Thursday letter to Garland.
To get rid of student debt in court, a borrower must prove the “undue hardship” standard: that they cannot maintain a minimal standard of living, that their circumstances aren’t likely to improve, and that they have made a good-faith effort to repay their debt. As Insider previously reported, though, that standard is very difficult to prove in court. That’s why Warren wrote a letter to Garland in March requesting an update on how those cases were being handled, but the administration has yet to deliver any detailed updates.
“Months have passed since my March 2022 request and borrowers are still waiting for this new undue hardship guidance. This is a severe problem for many borrowers who are in or on the brink of bankruptcy,” Warren wrote. “In practice, this standard has proven to be so difficult to meet that most borrowers do not even attempt to discharge their student loans through bankruptcy,” she added.
Given the roadblocks borrowers have faced thanks to the undue hardship standard, Warren requested Garland provide an update by September 15, 2022 on the Justice Department’s discussions regarding undue hardship claims, how many times judges have granted borrowers loan discharges, and reasons those cases may have been appealed.
Biden’s administration has promised to reform the bankruptcy process. Federal Student Aid head Richard Cordray told a House education subcommittee last fall that “the process doesn’t work well. It needs to be reformed … and we’re committed to doing that.” Under Secretary of Education James Kvaal later said that “Secretary Cardona has said we want to review that policy, and that is something that is underway now. There’s an interagency process for that, it’s not solely within the department’s discretion, and we’re working quite hard on that, actually.”
But throughout the pandemic, the administration has continued to oppose borrowers’ request to seek debt relief in court. Other Democratic lawmakers have taken notice of the issues with bankruptcy, as well — 27 of them said in April that student-loan borrowers had to clear an “unnecessary high bar” to get rid of their debt in court, and Democratic Sen. Dick Durbin and GOP Sen. John Cornyn last year introduced a bill last year that would allow borrowers to seek a bankruptcy discharge of their federal student loans after 10 years and remove the undue-hardship requirement.
Read the original article on Business Insider
