- ORIGINAL NEWS
Student loans are now easier to discharge in bankruptcy, attorneys say: It’s ‘life changing’
- SUMMARY
The Biden administration has recently updated its bankruptcy guidelines, making it significantly easier for student loan borrowers to discharge their debt in court.
This policy shift marks a departure from previous restrictions that made it virtually impossible for most borrowers to escape their education debt through bankruptcy.
Under the new guidelines, student loans are treated more like other types of debt during bankruptcy proceedings.
Borrowers can now submit a 15-page form outlining their financial hardship and demonstrate their inability to repay the loans.
This process has become less adversarial, with government attorneys less likely to oppose discharge requests.
While bankruptcy may provide relief for borrowers in extreme financial distress, experts caution that it should not be the first choice for most people.
Bankruptcy can have severe consequences, damaging credit scores and limiting access to loans and housing for up to 10 years.
Instead, borrowers are encouraged to explore alternative debt relief options.
Federal student loan borrowers have access to income-based repayment plans with low or zero monthly payments, economic hardship deferments, and loan forgiveness programs for certain groups, such as those with disabilities or who have suffered unemployment.
The Biden administration is also working on a revised student debt cancellation program and may announce details as early as November.
This program could potentially provide additional relief to struggling borrowers and may make bankruptcy an unnecessary option for many.
Before pursuing bankruptcy, experts recommend reaching out to a nonprofit credit counselor for guidance on alternative debt relief options.
This can help borrowers make informed decisions that minimize the long-term impact on their financial health.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“The discharge is life changing.”
“The Biden administration’s updated policy now treats student loans more like other types of debt in bankruptcy court, experts say.”
“I’ve helped several people take advantage of the expanded ability to discharge their student loans in bankruptcy”
“President Joe Biden’s plan to cancel up to $20,000 in student debt was struck down at the Supreme Court, the president started a new effort to forgive education debt.”
Negative
“Previously, it was difficult, if not impossible, for most people to part with their education debt in a normal bankruptcy proceeding.”
“Amid concerns that students would rack up debts for their education and then try to ditch their obligations, policymakers over the years had added extra stipulations for the discharge of student loans in bankruptcy.”