Senators urge bankruptcy watchdog to alert borrows to new student loan discharge guidance

On Thursday, U.S. Sens. Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI), urged the U.S. Trustee program (USTP) to education borrowers and other stakeholders about new bankruptcy guidance that makes student loan debt easier to discharge in bankruptcy proceedings.

© Shutterstock

Warren, the chair of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, and Whitehouse, the chair of the Senate Judiciary Subcommittee on Federal Courts, Oversight, Agency Action and Federal Rights, sent a letter to Tara Twomey, director of the executive office for U.S. Trustees, urging the office to close the information gap when it comes to student loan debt and bankruptcy.

“After years of presuming that no relief was available for crushing student loan debt, borrowers now have options,” the senators wrote. “The Biden administration has worked hard to enact policy change to help borrowers, but, as the low number of bankruptcy filers seeking student loan discharges shows, DOJ and ED must work harder to encourage borrowers to seek relief—and deliver on that relief when requested.”

The senators said, for decades, relief from student loan debt was out of reach for borrowers going through the bankruptcy process. But since 2022, the U.S. Department of Justice and the U.S. Department of Education have worked together to help student loan borrowers obtain relief from that debt when filing for bankruptcy.

While early data on new guidance to discharge the debt has been promising, the lawmakers said, there is still room for improvement. Only 632 borrowers filed cases seeking to discharge their student loans in the first 10 months of the new process, but the senators estimate the number of applications pales in comparison to the number of student loan borrowers struggling with decades-long debt.

“USTP should redouble its efforts to educate bankruptcy attorneys, advocacy organizations, bankruptcy trustees, and individuals on how the updated process can benefit borrowers who are crushed by student debt and are contemplating filing for bankruptcy,” the senators wrote.

The senators requested the USTP provide them with information on how the agency educates borrowers and others about the process.