The judge based her ruling, in part, on the borrower’s long-running medical problems, which she found constituted an undue hardship. Last month, a bankruptcy court in Delaware approved a borrower’s discharge request of approximately $100,000 in student loan debt, over the Department’s opposition. And instead, it has seemingly continued to vigorously oppose borrowers who are seeking to discharge their federal student loans in bankruptcy. So far, the Biden administration has not implemented reforms to its student loan bankruptcy policies. Inconsistent Signals From The Biden Administration On Student Loan Bankruptcy Reform While the Biden administration cannot change the bankruptcy code itself (that would require an act of Congress), exercising discretion and choosing not to engage in the adversary process could be a game-changer for many borrowers. Bankruptcy reform advocates have suggested several possible options for the administration to consider, including simply not opposing borrowers in bankruptcy adversary proceedings if they meet certain criteria - for example, if the borrower can demonstrate a persistent state of poverty or ongoing reliance on public benefits as their primary or only means of support. “ needs to be reformed … and we’re committed to doing that.”Ĭordray suggested, without providing much in the way of specifics, that the Biden administration was exploring options for modifying how the Education Department approaches bankruptcy proceedings that involve federal student loan discharge requests. “The process doesn’t work well,” he testified. Department of Education Federal Student Aid chief operating officer Richard Cordray told members of Congress at a hearing last year that the Department of Education’s current approach to federal student loan bankruptcy discharges is less than ideal for borrowers, and needs to change. Biden Administration Had Suggested That Student Loan Bankruptcy Reform Might Be Coming
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