WASHINGTON — The Biden administration announced changes Thursday that could make it easier for some student loan borrowers to discharge their debt through bankruptcy, updating a policy that had been widely criticized by consumer advocates and lawmakers.

The Justice Department issued guidance saying it will create a new form for borrowers to attest to their hardships and help the government assess their discharge request. The Justice and Education departments will review the information to determine whether to recommend discharge. The agencies will consider such factors as the person’s current and future ability to pay, taking into account efforts to earn income or manage expenses.

Associate Attorney General Vanita Gupta said the “guidance outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy.” She added: “It will allow Justice Department attorneys to more easily identify cases in which we can recommend discharge of a borrower’s student loans.”

The guidelines arrive nearly a year after Richard Cordray, chief operating officer of the Education Department’s Office of Federal Student Aid, told Congress the agency was working with the Justice Department to revise its approach on bankruptcy requests.

Advocates and liberal lawmakers have complained that the department aggressively fights people deep in debt and short of resources, a practice that they have said runs counter to President Biden’s interest in helping struggling borrowers.

Any monumental shift in the treatment of student loans in bankruptcy would require congressional action. But advocates have said the Education Department could also set a threshold for when to contest bids for cancellation and better define its parameters. The department agreed.


“Congress may have set a higher bar for granting student loan discharges during bankruptcy, but in practice, that bar has become very difficult for deserving borrowers to clear,” Undersecretary of Education James Kvaal said Thursday. “After decades of inaction in Washington, our. . .team was determined to partner with the Justice Department to craft clearer, fairer, and more practical standards.”

Discharging education debt through bankruptcy is difficult, requiring borrowers to file a separate adversary proceeding to have the student loans canceled. They must convince the court the education debt would impose an “undue hardship” and fight any attempt from their lender to prevent any discharge.

The Education Department has the right to contest bankruptcy discharges to help maintain the fiscal integrity of the $1.6 trillion federal student loan portfolio. Consumer groups, however, say the agency also has a duty to help distressed borrowers and has failed to live up to that obligation.

A 2021 review by The Washington Post of dozens of bankruptcy cases found department lawyers asked federal student loan borrowers to take on multiple jobs, seek child support to free up money or have their children find work to pay off their loans.

After that reporting, Sen. Richard J. Durbin, D-Ill., chairman of the Senate Judiciary Committee, held a hearing to explore ways to lower the barriers to discharging education debt. Durbin and Sen. John Cornyn, R-Tex. sponsored a bill that would allow borrowers to discharge their federal student loans through bankruptcy after 10 years. The legislation stalled in committee.

The bipartisan interest from lawmakers and the administration in reconsidering the bankruptcy discharge process comes after years of failed efforts to streamline the process. Biden, who helped impose tougher consumer bankruptcy laws as a senator, said on the campaign trail that he now supported letting people who enter bankruptcy discharge their student debt.


After Cordray said the Education Department was reviewing its policy, some advocates hoped the agency would soften its approach on pending bankruptcy requests. But it faced backlash over its handling of some cases earlier this year.

In one case, the department tried to fight a court-approved discharge of $100,000 in federal student loans held by Ryan Wolfson, a 35-year-old in Delaware who had never made payments on the debt. The judge concluded that Wolfson, who has epilepsy, could not afford his basic needs without the support of his father and there was no evidence to suggest his plight would improve.

The move drew intense criticism from debt cancellation and student rights activists, prompting the Biden administration to withdraw the appeal days later.

Thursday’s guidance is being met with cautious optimism from consumer advocates.

“The new guidance has the potential to provide a meaningful avenue for relief, but its effectiveness will depend on how it is implemented by the Departments of Education and Justice,” said John Rao, a staff attorney at the National Consumer Law Center.

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