Student Loan Borrowers Face Uncertainty Under New Administration
As the Trump administration prepares to take office, student loan borrowers are bracing themselves for potential changes to the bankruptcy process. The Biden administration’s recent guidance made it easier for borrowers to discharge their student debt in court, but experts warn that this leniency may be short-lived.
A Shift in Approach
Malissa Giles, a consumer bankruptcy attorney in Virginia, expects the Trump administration to tighten its approach to student loan bankruptcy cases. “I plan to be more conservative with my clients and avoid filing cases that may not be successful under the new administration,” Giles said.
Higher education expert Mark Kantrowitz agrees, predicting that the Trump administration will rescind the Biden administration’s guidance. “This could make it more difficult for student loan borrowers to get their debt discharged in bankruptcy,” Kantrowitz warned.
A Defective Policy
However, not all experts are convinced that the Trump administration will make it harder for student loan borrowers to access bankruptcy relief. Latife Neu, a bankruptcy lawyer in Seattle, notes that there is bipartisan consensus that the current policy is flawed. “The higher bar for student loan borrowers to get their debt discharged in bankruptcy is a defective policy,” Neu said.
Updated Bankruptcy Guidelines
In 2022, the U.S. Department of Education and the U.S. Department of Justice released updated bankruptcy guidelines to make it easier for struggling borrowers to get their student loans erased in court. The new approach treats student loans more like other types of debt in bankruptcy court, allowing borrowers to fill out a 15-page form detailing their financial struggles and making their case for relief.
A Significant Increase in Bankruptcy Cases
In the first 10 months of the new policy, student loan borrowers filed over 630 bankruptcy cases, a significant increase from recent years. The vast majority of borrowers seeking discharge received full or partial discharges, according to the Biden administration.
As the Trump administration takes office, student loan borrowers are left wondering what the future holds for their debt. Will the new administration continue to make it easier for borrowers to access bankruptcy relief, or will they revert to a more restrictive approach? Only time will tell.
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