Justice Department and Department of Education Report Ongoing Progress in Student Loan Bankruptcy Discharge Process

WASHINGTON – The Justice Department, in close collaboration with the Department of Education, unveiled today the ongoing success and growth of a initiative launched in November 2022 to address cases where individuals are looking to discharge their federal student loans in bankruptcy. Data and statistics tracking the effectiveness of the initiative in the past 18 months show that it is meeting its objective of offering a more transparent, fair, and efficient avenue for borrowers to seek a discharge of their student loans in consumer bankruptcy cases. This initiative has resulted in a rise in the number of eligible federal student loan recipients seeking and receiving debt relief under the Bankruptcy Code.

The two departments finalized updated guidelines in November 2022 that clarified a more equitable, accessible process to ensure consistent handling of federal student loan discharge, reduce the burden on borrowers in pursuing such actions, and streamline the identification of cases where discharge is appropriate. Both Departments committed to an ongoing evaluation of the effectiveness of the guidelines. As part of this commitment, the Justice Department conducted a survey of all 94 U.S. Attorneys’ Offices after the first year of implementation, and recently conducted a follow-up survey to gather updated information on the guideline’s usage.

The data gathered from these surveys indicates that the new process continues to be successful, with an increasing number of borrowers seeking and receiving discharges of their federal student loan obligations. Specifically, since the process was introduced 18 months ago, data collected by the departments show that:

• As expected, case filings have been steadily increasing as consumers become more aware of the new procedure. A total of 588 new cases were filed from October 2023 to March alone, marking a 36% surge compared to the preceding six-month period. From November 2022 to March, a total of 1,220 cases were initiated, representing a significant rise from prior years. The departments foresee this trend continuing.
• A significant majority of borrowers seeking discharge are benefiting from the guidelines. In cases decided by the courts from November 2022 through March, 98% have resulted in debt relief through full or partial discharge. Moreover, the number of court judgments granting full or partial discharge has continued to grow, surpassing the counts from the previous 12 months.
• Borrowers are widely embracing the new guidelines outlined in the initiative. In the filed cases, 96% of borrowers are willingly utilizing the streamlined process, which includes a standard attestation form that simplifies the identification and submission of relevant information to support their discharge requests.
• Several bankruptcy courts have adopted procedures that acknowledge the value of the new process, aimed at further streamlining the steps debtors must take to secure discharges.

“We are now equipped to assess the effectiveness of the student loan bankruptcy discharge guidelines through a robust collection of empirical data,” stated Acting Associate Attorney General Benjamin C. Mizer. “The outcomes are evident: these guidelines have made the prospect of a fresh start in bankruptcy a viable option for individuals burdened by student loan debt.”

“Our clear, fair, and practical standards are assisting distressed borrowers in accessing relief that was previously unattainable,” said U.S. Under Secretary of Education James Kvaal. “This data dispels the notion that struggling borrowers are unable to discharge their student loan debt through bankruptcy. We will persist in collaborating with our colleagues at the Department of Justice to simplify the process for borrowers to obtain the much-needed relief as intended.”

In addition to internal data surveys, the Justice Department has taken additional steps to support and assess the new guidelines. The Justice Department has been engaging closely with the Department of Education regarding the process. Since the guidelines’ implementation, a dedicated team of experts within the Justice Department’s Civil Division have sought feedback on the new process from consumer law organizations, including the National Association of Consumer Bankruptcy Attorneys. Furthermore, the Civil Division has conducted training sessions for Justice Department attorneys and the public, with support from regional bar associations and the courts. The Department of Education also participated in training sessions hosted by regional bar associations, the American Bankruptcy Institute, and U.S. Trustee Program, as well as at the annual meeting of the National Association of Chapter 13 Trustees, which brought together private attorneys and Chapter 13 trustees.

The Departments will continue to monitor the impact of the guidelines to ensure proper implementation and alignment with the intended goals.