Biden Student Loan Bankruptcy Policy 'Life Changing'

Consumer attorneys are describing the Biden administration's 2022 student loan bankruptcy policy as "life changing" in creating ease for people to walk away from student debt, CNBC reported.

More than 630 bankruptcy cases — a "significant increase" from recent years — were filed in the first 10 months of the new policy, The Daily Mail reported, citing federal departments.

"We have gotten forgiveness for a number of clients under the new bankruptcy changes," Virginia consumer bankruptcy lawyer Malissa Giles told CNBC for its story published Tuesday. "The discharge is life changing for them and their families."

The Department of Justice and the Department of Education announced the joint policy in November 2022 to implement a "better, fairer, more transparent process for student loan borrowers in bankruptcy," Associate Attorney General Vanita Gupta said in a release.

"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," U.S. Undersecretary of Education James Kvaal said then, adding that borrowers had to prove "undue hardship" to discharge their debt.

Now it's a 15-page form that allows borrowers to outline their financial struggles that are in line with other types of debt.

However, though easier, CNBC quoted an expert who said borrowers should go a different route than bankruptcy, information that can stay on a credit report for 10 years and impede  the ability to buy a house or rent an apartment. There are myriad loan relief programs that work with borrowers on payment plans that fit their needs. 

One of those is a Plan B loan forgiveness plan hatched by the Biden administration after the Supreme Court rejected his original, more far-reaching program last summer. Plan B, however, is harder to qualify for, according to the report.

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