Warren Presses DOJ on Updates to New Guidance on Discharging Student Loans in Bankruptcy
Press Release
"The DOJ's November 2022 guidance brought long-awaited changes that could help establish a fairer and more transparent bankruptcy system that offers student loan borrowers a meaningful path to financial recovery. Further, I am supportive of the Biden Administration's recent announcement of a 12-month on-ramp transition period to support borrowers "smoothly and successfully return to repayment.' If these actions are implemented concurrently, they will "help borrowers avoid the harshest consequences of missed, partial, or late payments' while the Department initiates a regulatory process to provide debt relief."
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"The November 2022 guidance issued by the DOJ was an important step towards reforming the broken bankruptcy system In its guidance, the DOJ recognized that borrowers "have been deterred from seeking discharge of student loans in bankruptcy due to the historically low probability of success.' Therefore, this updated guidance is designed to allow the DOJ and ED to facilitate the objective of more discharges and provide hope for borrowers seeking bankruptcy as a viable pathway to financial freedom. In fact, one of the explicit goals of the 2022 guidance is to "increase the number of cases where the government stipulates to the facts demonstrating a debt would impose an undue hardship and recommends to the court that a debtor's student loans be discharged.'"
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"I appreciate the Administration's recognition that establishing a fair and accessible discharge process will help borrowers crushed by student loan debt, and I believe the new bankruptcy guidance has the potential to provide a meaningful avenue for relief. I further support DOJ's plan to evaluate the guidance one year into the guidance's operation. However, with the looming threat of restarting student loan payments, and given that more than eight months have now passed since DOJ's announcement, I am writing to seek an update on the current implementation and effects of the DOJ guidance."
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