In the United States, cases of filing for bankruptcy to be exempted from student loan repayment responsibilities have been found to be increasing.
According to a report in the Wall Street Journal (WSJ) on the 16th, this is a change that came after the Biden administration significantly relaxed the requirements for bankruptcy determination, such as income and expenditure standards, for student loan borrowers in November last year.
The Federal Ministry of Justice announced that from November of last year to September of this year, 632 people filed for bankruptcy to be exempt from student loan repayments. Before the pandemic halted federal student loan payments, the average number of applicants was 480 per year.
The absolute numbers are still not high, but it has definitely increased compared to before. The federal Department of Education predicted that bankruptcy filings will continue to increase as more people become aware of the guideline changes.
The government appears to be recommending a new method of debt relief. “It has become easier for borrowers to apply for forgiveness, and courts have largely accepted the Department of Justice’s recommendations to forgive student loans in eligible cases,” said Deputy Assistant Attorney General Vanita Gupta.
The Biden administration has actively promoted this change in student loan forgiveness policy to young voters. Currently, approximately 40 million student loan borrowers hold $1.6 trillion in federal student debt, and more than 3 million of them are seeking forgiveness of $127 billion in loan debt.