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Key Senators Ratchet Up Pressure on Department of Education to Reform Student Loan Bankruptcy Practices

March 31, 2022

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Key Senators Ratchet Up Pressure on Department of Education to Reform Student Loan Bankruptcy Practices

Today, a coalition of U.S. senators, led by Senate Judiciary Chairman Dick Durbin, Senate HELP Committee Chairwoman Patty Murray and Senate Majority Leader Chuck Schumer, sent a letter to Education Secretary Miguel Cardona pressing the Department of Education to enact policy changes related to student debt discharges in federal bankruptcy court.

“All too often, ED and DOJ oppose undue hardship discharges in adversarial bankruptcy proceedings, requiring debtors to effectively demonstrate a certainty of hopelessness before they can obtain relief,” the letter states. “Clearing this statutorily unnecessary high bar is challenging enough for individuals who are represented by experienced attorneys. It is virtually impossible for those without representation.”

This letter comes on the heels of a February letter sent to the Department by a number of students rights advocacy groups, including Student Defense, who previously called for similar policy changes.

“Student borrowers who have been declared bankrupt by a federal court shouldn’t be automatically met with government opposition to discharging their student loans,” said Student Defense President Aaron Ament. “Opposing bankrupt student borrowers is costly for the Department and only fuels their financial turmoil. It’s the opposite of the role the Department should be playing. We appreciate the Senate support towards this critical issue and we again call on the Department of Education to quickly reform its bankruptcy policies to better support student borrowers.”

Student Defense has called on the Biden Administration to issue new guidance to change the Department of Education’s default position of opposing student loan discharges in bankruptcy. In mid-July 2021, Cardozo School of Law Professor Pamela Foohey, Aaron Ament and Daniel Zibel published a new legal essay in the Minnesota Law Review entitled Changing the Student Loan Dischargeability Framework: How the Department of Education Can Ease the Path for Borrowers in Bankruptcy. The essay proposed that the Department take a presumptive position of “no contest” in individual bankruptcy cases or to streamline contesting undue hardship discharge requests by using easy to access, objective criteria.