A group of Democratic senators has stated that the process is working to help student loan borrowers discharge their debt in bankruptcy court. In this regard, it’s worth noting that Senators Elizabeth Warren and Dick Durbin recently sent a letter to the Departments of Justice and Education on this issue.
Student loan cancellation has historically been a difficult issue to resolve
Firstly, it’s essential to clarify that historically, the process of discharging student loans in bankruptcy court has always been quite difficult. This is because borrowers were required to prove that their situation imposed an “undue hardship”, preventing them from maintaining a basic standard of living. Additionally, they had to demonstrate that their personal circumstances were unlikely to improve and that they had made every effort to repay their debt.
All these requirements have made it very challenging to qualify for loan cancellation over the years. However, things changed with President Biden’s initiative when in November 2022, he released new guidelines to streamline the process. One key aspect was the implementation of a self-certification form, enabling the Departments of Education and Justice to process applications more efficiently.
The implementation of the new cancellation application model has increased the number of requests
The new management model on this issue, launched by the Biden administration, has led to an increase in new cases. Specifically, from October 2023 to March 2024, 588 new cases were filed, representing a 36% increase compared to the previous six months.
In short, the loan cancellation process has been favorable as it has slightly sped up processing, benefiting a larger number of people. However, the process remains slow. In this sense, it is particularly relevant that legislation should prevent student loan debt from negatively impacting the long-term financial stability of all affected individuals.
