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Federal agencies have a plan to help discharge student loan debt

On Behalf of | Jan 2, 2023 | Bankruptcy

If one of the reasons you’ve decided against bankruptcy is because you’ve heard that it’s nearly impossible to discharge student loan debt, the federal government has announced a plan that could change that for you. With President Joe Biden’s attempt to forgive as much as $20,000 in student loan debt for some borrowers hung up by a federal district court, two agencies of the federal government have come up with another solution.

The U.S. Department of Justice (DOJ) and the Department of Education (ED) have teamed up to provide what Associate Attorney General Vanita Gupta called a “better, fairer, more transparent process for student loan borrowers in bankruptcy.” The DOJ will review the information regarding student debt provided by bankruptcy filers and, based on that information, may recommend the discharge of that debt to the bankruptcy judge in the case.

“Clearer, fairer, and more practical standards”

An official with the ED says that they have developed “clearer, fairer, and more practical standards to guide recommendations for student debt discharges during bankruptcy proceedings” than the “undue hardship” requirements that filers have been required to show in order to get any of their student loan debt discharged.

It’s been a confusing and frustrating time for Americans of all ages who are mired in student loan debt. Plans for loan forgiveness and legislation that would allow for student loan debt to be treated more like other kinds of debt in bankruptcy have fallen victim to political differences.

This new guidance from the DOJ will help at least some people with student loan debt get the relief they couldn’t in the past. Having sound legal guidance can make a big difference in your bankruptcy case.


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