It has been an eventful time for student loan borrowers.  As the December 31, 2022 end date on the payment pause for student loan debt looms, there have been several key developments to which borrowers should be aware.  This month, the 8th Circuit Court of Appeals upheld an injunction putting a hold on President Biden’s student loan forgiveness program.  On November 18, 2022, the Biden Administration asked the Supreme Court to overrule the 8th Circuit’s ruling, and put the student loan forgiveness program back on track.  A day after requesting relief from the Supreme Court, the Education Department began sending notices to borrowers approved under the forgiveness program.  On November 22, 2022, President Biden announced that the payment pause on student loans would be extended to June 30, 2023 or until the litigation over his student loan forgiveness plan is resolved, whichever is earlier.

On November 17, 2022, the Justice Department and Department of Education released updated guidelines regarding requests to discharge student loans in bankruptcy cases.  For future bankruptcy cases wherein Debtors attempt to discharge their student loans, the new guidelines are for Federal Attorneys (Department of Justice) to stipulate to the facts demonstrating an undue hardship and recommend that a debtor’s student loan be discharged if the following conditions are satisfied:

1) the debtor presently lacks an ability to pay

2) the debtor’s ability to pay the loan is likely to persist in the future

3) the debtor has acted in good faith in the past in attempting to repay the loan

Bankruptcy Courts in Massachusetts typically employ the “totality of the circumstances” test when deciding whether to discharge a debtor’s student loans, and these guidelines will apply.  This news is huge for consumer attorneys assisting borrowers in bankruptcy, as it gives clear guidance to debtors and their attorneys as to what types of information the Department of Education will be looking for to avoid drawn out litigation on whether a debtor’s student loans should be discharged in bankruptcy. 

If you have student loan debt and need representation, reach out to us today for a consultation.