Washington, D.C.– The Department of Education (ED) and Department of Justice (DOJ) announced yesterday policy changes to the bankruptcy discharge process for student loan borrowers. The new changes simplify and standardize the process for economically distressed borrowers to discharge their debts.
Whitney Barkley-Denney, deputy director of state policy and senior policy counsel at the Center for Responsible Lending (CRL), made the following statement:
For decades, it has been nearly impossible for students to get their debts discharged through bankruptcy. The announcement is long overdue and much needed as the fate of student debt cancellation is currently unknown. The new guidance takes the thumb off the scale for creditors and allows struggling borrowers, who are disproportionately students of color, get a fair evaluation.
While borrowers with federal or private student loans must still prove they will suffer “undue hardship” unless their debt is discharged in bankruptcy, the new process uses existing data from the ED and a standardized test to create fair and standard criteria for the DOJ to decide if they should recommend discharge to a judge.
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