Senate Democrats are demanding the Joe Biden administration back off its attempts to overturn court rulings that help student debtors. The new demands were prompted by our original series showing the administration has been betraying Biden’s campaign promise to allow borrowers to discharge their student debts through bankruptcy. Instead, the administration has fought debtors in bankruptcy court.
“Over the past several decades, Congress and the courts have together nearly eliminated bankruptcy as a viable path towards financial recovery for most Americans struggling with student loan debt,” twenty-seven Democratic senators wrote in a letter to the Education Department and Justice Department on March 31, the Washington Post reported. “The federal government’s aggressive litigation challenges against students who pursue undue hardship claims further exacerbates this situation,” the letter added.
The letter comes days before a scheduled protest at the Department of Education to press the Biden administration to cancel student debt.
As a senator, Biden was a prominent advocate of initiatives that have made it difficult for Americans to reduce their student debts in bankruptcy court. Borrowers are forced to undergo a separate proceeding to handle their student loans, known as an “adversary proceeding,” where they must prove that the debt is causing them “undue hardship.”
During the 2020 campaign, Biden pivoted on the issue, endorsing Senator Elizabeth Warren’s (D-MA) plan to allow borrowers to discharge their student debt through the bankruptcy process like other types of consumer debt. Unfortunately, the rhetorical change from Biden hasn’t translated into a policy change, and Biden officials have continued to fight student loan debtors in bankruptcy proceedings.
Key Case Ignited Public Outcry
In February, we first reported that Biden administration lawyers were trying to overturn a court ruling allowing Ryan Wolfson, a thirty-five-year-old epipleptic man saddled with $100,000 of student debt, to have the loans discharged in bankruptcy court. After our story about Wolfson went viral, the Biden administration abruptly withdrew the appeal.
As we have reported, the case was no anomaly. On the contrary, the administration has been systematically pursuing much the same legal strategy against the most financially beleaguered student debtors across the country. (The Education Department withdrew an appeal in a similar case after our follow-up story.)
In response to that reporting, Senate majority leader Chuck Schumer told The Lever that he “absolutely” supported demands by activists that the Education Department stop opposing borrowers seeking student loan relief in bankruptcy cases. “It’s outrageous that other people get to declare bankruptcy but students can’t,” he said at the time.
Now, twenty-seven Senate Democrats, led by Senator Dick Durbin of Illinois, are echoing that declaration in a letter to the administration.
“We are pleased that [the Education Department] changed course in the Wolfson case and decided not to spend taxpayer dollars attempting to force this individual to continue shouldering crushing debt,” the senators wrote in their letter to Education Secretary Miguel Cardona and Attorney General Merrick Garland.
“Unfortunately, this case has been an exception to the standard practice,” the senators’ letter said, referring to the administration dropping the Wolfson case.
The letter calls upon the Biden administration to update its guidance on how it handles federal student debt bankruptcy cases, including by identifying cases where the borrower faces “undue hardship” in repaying their debt as a result of disability or financial circumstances.