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Changing the Student Loan Dischargeability Framework: How the Department of Education Can Ease the Path for Borrowers in Bankruptcy

By Pamela Foohey, Aaron S. Ament, & Daniel A. Zibel. Full Text.

The United States’ consumer bankruptcy system supposedly gives “honest but unfortunate” individuals “a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Access to bankruptcy’s discharge of debt is especially important in the wake of the COVID-19 pandemic, which has resulted in a once-in-a-century economic crisis that is projected to increase bankruptcy filings by people struggling to recover. Those who file bankruptcy will find a system that is already difficult to navigate and has long-recognized racial and gender disparities in access and outcomes.

Student loan borrowers will find a system with even more barriers to relief from their education debt. These barriers are two-fold: some are implemented by bankruptcy laws, while others are put up by loan holders—including the United States Department of Education. This Essay focuses on how the Department should update its policies for how it responds to borrowers who seek to discharge their student loans in bankruptcy.