Before the Biden administration made a major change to the way student loan debt is handled by the federal government, you couldn’t get rid of your student loan debt merely by filing for bankruptcy. Colorado borrowers had to file a separate lawsuit to discharge that particular type of debt, and the process was rarely fair. It was a system that seemed mostly random to the people who attempted to navigate it and was infamous for being notoriously time-consuming.
The federal government treats student loans differently
This is because student loans were treated differently by the federal government as opposed to medical bills, credit card bills or the majority of other debt types. In order to have any hopes to discharge the debt, you had to use a separate lawsuit to prove that repayment would cause you undue hardship. The new process gives borrowers the option to file an attestation form.
The news of this major change in the way student loan debt can be discharged came in August 2022. This announcement made by President Joe Biden and Education Secretary Miguel Cardona made the announcement left countless student loan borrowers with optimism that they’ll finally be able to get out of debt.
Who can discharge their student loan debt?
In order to be eligible, you have to meet certain criteria. Your expenses must be more than your income, for instance. You may also become eligible once if you’ve reached retirement age or spent over a decade making repayments. It’s also necessary to show that you’ve made a good-faith effort to make enough money to pay back your loans.
Something that stays the same after this change is that the last word in the matter still comes from a bankruptcy judge. However, now that the standards have been made clearer, it is expected to be a much fairer process.
There is also the promise that borrowers won’t be investigated in an unreasonably burdensome and drawn-out manner, something that many in student loan debt have had to experience. That’s the official word from the Justice Department, and only time will tell if it plays out as borrowers hope.