July 20th 2024.
New data from the Department of Justice has revealed that the recent policy change by the Biden administration is proving to be successful in providing relief to student loan borrowers through bankruptcy. A report released on July 17th showed a significant increase, with 588 people successfully having their student debt discharged between October 2023 and March 2024. According to CNN, there has been a total of 1,220 new cases filed since the implementation of the new federal policy in March.
Before the change, which came into effect in November 2022, student loan discharge was nearly impossible for those going through the bankruptcy process. This was due to the requirement for borrowers to prove that paying off their student debt would cause them "undue hardship." However, since the policy change, 98% of cases that have gone through the court system have been granted full or partial student debt discharge.
The updated guidance has simplified the process for borrowers to demonstrate hardship while repaying their student loans. This has also made it easier for federal lawyers to recommend to courts that the debt be discharged. Benjamin C. Mizer, the acting associate attorney general, released a statement praising the positive impact of the policy change, stating that the numbers speak for themselves. He also emphasized the importance of Congress maintaining this policy, as it would require legislative action to remove it.
According to CNBC, Senator Elizabeth Warren expressed her support for the policy in a letter to Tara Twomey, the director of the U.S. Trustee Program at the Department of Justice. In her letter, Warren urged for continued education for borrowers, attorneys, and courts on the Biden administration's efforts to treat federal student loans more similarly to bankruptcy. As a strong advocate for student loan debt relief and a former bankruptcy law professor at Harvard, Warren highlighted the fact that between 2011 and 2019, only 0.2% of borrowers who filed for bankruptcy were able to get their loans discharged. This was due to additional requirements added by lawmakers, who were concerned about young people trying to avoid repayments after graduation.
The previous system often put borrowers in difficult situations, asking them to prove "certainty of hopelessness" when it came to repaying their loans. This resulted in intense court battles for government lawyers. Aaron Ament, the president of the National Student Legal Defense Network, expressed his satisfaction with the progress made, acknowledging that a quarter of a million borrowers file for bankruptcy each year in the United States. However, he also emphasized that there is still much work to be done, as only a small fraction of borrowers have been able to receive relief.
The Biden administration has made significant strides in providing debt relief, and they have promised to continue this work leading up to the 2024 election. As of May 2024, close to five million Americans have had a total of $167 billion in student debt cancelled. This is a significant step towards alleviating the burden faced by many individuals and families across the country.
In related news, the Supreme Court is expected to make a decision on whether student loan payments will double in some states. This could have a major impact on the lives of many borrowers, further highlighting the importance of continued efforts towards student debt relief.
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