Number of Americans Filing Bankruptcy To Get Rid Of Student Debt Increases
A majority of Americans looking for discharge have received full or partial discharges, according to the Department of Justice.
Three years after a nationwide pause on student loan payments amidst the COVID-19 pandemic, Americans are taking advantage of legal changes made by the Biden administration to make discharging student loans in bankruptcy easier.
The changes came just one year ago in November and are supposed to help eligible borrowers reduce or eliminate their student debt. According to a Department of Justice (DOJ) news release from Nov. 16, 2023, about 632 borrowers filed bankruptcy to get rid of student loans between November 2022 and September 2023.
The 10-month period had a higher number of filers than the average rate recorded before the pandemic, which was 480. The release from the DOJ also noted that, to date, 99% of the cases “where courts have entered orders or judgments to date, the government recommended, and the court agreed to, a full discharge or partial discharge.”
Americans filing for bankruptcy to discharge student loan debt should meet three criteria, according to Fox Business. They include: proving that a good-faith effort to repay debt was made, demonstrating an inability to repay loans in the present, and not being able to foresee repaying loan amounts in the future, the news outlet reported.
Associate Attorney General Vanita Gupta thinks the new policy has been a success thus far. Gupta said, according to Fox Business, that after a year-long review of the results, the new benchmarks have “made a real difference in borrowers’ lives by ensuring student-loan discharges are more accessible to eligible borrowers.”
Chief Operating Officer Rich Cordray of the Department of Education’s Office of Federal Student Aid agreed. He said, according to the DOJ’s news release, “It is clear that this improved process is helping struggling borrowers.”
Fox Business noted that federal data showed that borrowers have average bill amounts that fall somewhere between $200 and $299 per month.