Elizabeth Warren wants more student loan borrowers to know bankruptcy is easier now

U.S. Senator Elizabeth Warren (D-MA) faces reporters during a break in a bipartisan Artificial Intelligence (AI) Insight Forum for all U.S. senators at the U.S. Capitol in Washington, September 13, 2023.
Julia Nikhinson | Reuters

Elizabeth Warren wants more student loan borrowers to know that it is now easier to part with their debt in bankruptcy court.

In a May letter reviewed by CNBC, the Democratic senator from Massachusetts, along with Sen. Sheldon Whitehouse, D-R.I., wrote to Tara Twomey, director of the U.S. Trustee Program at the Department of Justice, urging her "to continue to educate borrowers, attorneys, and courts" about the Biden administration's updated approach for student loan holders.

Warren, a former Harvard Law School professor who taught courses on bankruptcy, is referring to guidance released by the U.S. Department of Education and Justice Department in the fall of 2022. That joint memo was intended to have federal student loans be treated more like other types of debts in bankruptcy, experts say.

More from Personal Finance:
Average consumer carries $6,218 in credit card debt
Here's the inflation breakdown for April 2024 — in one chart
Some vacationers expect to carry summer travel debt

Over the years, policymakers added extra stipulations for the discharge of education loans, expressing concerns that young people would try to ditch their obligations after graduating. As a result, borrowers were often asked to prove a "certainty of hopelessness," and government lawyers battled most requests. Between 2011 and 2019, more than 99.8% of borrowers who filed for bankruptcy did not get their student loans discharged, the senators wrote in the May 23 letter.

Discharging student debt in bankruptcy is now easier

The new guidance has already led to changes.

In the first 10 months of the Biden administration's more lenient process, student borrowers filed more than 630 bankruptcy cases, a "significant increase" from recent years, it reported last year. The administration said that the majority of those borrowers received full or partial discharges of their education debt.

CNBC spoke to bankruptcy attorneys earlier this year who said they noticed the difference.

"While the government used to fight discharge aggressively in almost every case, there is now a policy to agree when the borrower can show financial need and a history of good faith efforts to pay the loans," Latife Neu, a bankruptcy lawyer in Seattle, said in March.

"I've helped several people take advantage of the expanded ability," Neu said at the time.

Many borrowers are 'not aware' of changes

Yet Warren says more work still needs to be done.

"More than 43 million borrowers in the United States carry a total of $1.6 trillion in student loan debt, and more than 2 million borrowers have been repaying those loans for at least 20 years," Warren and Whitehouse wrote.

"DOJ and ED must work harder to encourage borrowers to seek relief — and deliver on that relief when requested," they added.

The Department of Justice and Education Department did not immediately respond to a request for comment.

[video_shortcode_iframe src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000315464" itemprop="image" content="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000315464" data-src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000315464"]

'Do [it] now before November'

Malissa Giles, a consumer bankruptcy lawyer in Virginia, agreed that the government needed to better inform borrowers and lawyers about the new process.

"Most folks I see are not aware of the new bankruptcy discharge options," Giles said. Several of her clients have benefitted from it.

Many law firms continue to refuse to take on these cases, she added, because of the low success rate of the past. She said one attorney told her that he did not want to spend the time updating his strategy for the new procedure before the election. (If former President Donald Trump wins the election, experts say, there's no guarantee the more lenient approach wouldn't come to an end.)

"But for me, that makes it even more important to take advantage of the litigation approach now, rather than waiting," Giles said. "I tell current clients that if they want to pursue discharge and are eligible, they should do [it] now before November."

OTHER NEWS

17 minutes ago

U.S. Open Complaints Grow After Paywall Frustrations: 'Atrocious' Sound & Graphics Issues Anger Golf World

17 minutes ago

Zain Davids, Shilton van Wyk bolster Blitzboks in last-ditch bid for Paris Olympics

18 minutes ago

Star Wars Outlaws: Ubisoft reveals details and gameplay of anticipated game

18 minutes ago

New poll suggests less than half of Americans plan to buy an EV for their next vehicle — here’s why

18 minutes ago

ATP Halle draw: Jannik Sinner finds out first opponent as world No 1 as he lands tricky draw

18 minutes ago

Corey Heim notches best Xfinity Series finish at Iowa Speedway

18 minutes ago

Biden, Trump step up outreach to Black men

18 minutes ago

Four nights in the Maldives taught me something I wish I'd known 10 years ago

18 minutes ago

My Spy The Eternal City official trailer

18 minutes ago

Jo Cox's sister warns that politicians are still forced to fear for their lives eight years after Labour MP's murder by far-Right thug

18 minutes ago

Lady Louise Windsor, 20, borrowed her mother the Duchess of Edinburgh's floral fascinator for Trooping the Colour

18 minutes ago

Kevin Campbell tells incredible story of a 14-year-old Wayne Rooney during Southport friendly in resurfaced footage of late striker, after the former England captain paid tribute to his ex-Everton team-mate following his death aged 54

18 minutes ago

Thatcherism, austerity, Brexit, Liz Truss... goodbye and good riddance to all that

18 minutes ago

Starmer called 'political robot'

18 minutes ago

Southgate expects 'everybody to enjoy' England's opening Euros match despite security concerns

18 minutes ago

The US Open Contender Who Created His Own Highly-Rated Golf Course

18 minutes ago

John Cale's lockdown music fuelled by rage

20 minutes ago

Operation Mincemeat: the West End hit is still the perfect mix of ingenious, silly and moving

25 minutes ago

Cian Uijtdebroeks feels he needs to slow down a bit: "Sometimes I just want too much"

25 minutes ago

Hargreaves Lansdown founders hold keys in £4.7bn takeover battle

25 minutes ago

Premier League referee Bobby Madley shares touching memory of Matija Sarkic's brilliant gag on national team duty with Serbia... as he pays tribute to Millwall star after his death aged 26

28 minutes ago

Motorcyclist, 23, dies after accident at junction of Bencoolen Street, Stamford Road

28 minutes ago

BIG3 Week 1 recap: Highlights, final scores, key takeaways from season opener

28 minutes ago

Would the Lloyds share price be higher if the bank was listed in the US?

28 minutes ago

Andrey Rublev to skip Olympics for the sake of his health

29 minutes ago

Bills Linebacker on Injury Watch After Minicamp

29 minutes ago

Knights rookie burns Edwards

29 minutes ago

Expect two rate cuts this year: Citi's Nathan Sheets

29 minutes ago

I’m relieved AI has come at the end of my investing career

29 minutes ago

Gas prices fall as rent, some food costs increase, latest CPI report shows

29 minutes ago

Emirates NBD announces prestigious LEED certifications awarded across branches in the UAE and Saudi Arabia

29 minutes ago

How to watch Serbia vs England for FREE: TV channel and live stream for Euro 2024 game today

29 minutes ago

All set for President Cyril Ramaphosa’s inauguration: How the day will unfold

29 minutes ago

Bridgerton season 3 part 2 release date and time on Netflix

29 minutes ago

Married At First Sight's Hayley Vernon gets baptised and announces she's 'found Christ' after quitting the 'soul destroying' adult industry

29 minutes ago

Epping death: Disturbing details emerge after wife allegedly bashed her husband Kevin Park to death with a hammer in their Sydney home

36 minutes ago

Lady Louise Windsor, 20, borrowed her mother the Duchess of Edinburgh's floral fascinator for Trooping the Colour

37 minutes ago

Brits amazed by UK island with tropical sandy beaches – and it's great for stargazing

37 minutes ago

Chelsea ready for almighty Bayern Munich transfer scrap but Liverpool still ominously lurking

37 minutes ago

Everton eye move for Man United defender as Jarrad Branthwaite replacement