DOJ and Education Department Have Worked Together to Help Borrowers Obtain Student Loan Relief after Filing for Bankruptcy - But Few Borrowers are Taking Advantage

Text of Letter (PDF)

May 24, 2024 - Washington, D.C. – On Thursday, U.S. Senators Elizabeth Warren (D-Mass.), Chair of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, and Sheldon Whitehouse (D-R.I.), Chair of the Senate Judiciary Subcommittee on Federal Courts, Oversight, Agency Action, and Federal Rights, sent a letter to Tara Twomey, Director of the Executive Office for U.S. Trustees, urging the U.S. Trustee Program (USTP) to close the information gap and educate borrowers, attorneys, and courts about new bankruptcy guidance that makes it easier for student loan debt to be discharged in bankruptcy. 

For decades, student debt relief has been largely out of reach for borrowers going through the bankruptcy process. However, since the November 2022 rollout of a new process for handling these requests, the Department of Justice (DOJ) and the Department of Education (ED) have worked together to help student loan borrowers obtain relief from crushing debt after filing for bankruptcy. 

“After years of presuming that no relief was available for crushing student loan debt, borrowers now have options,” wrote the senators. “The Biden administration has worked hard to enact policy change to help borrowers, but, as the low number of bankruptcy filers seeking student loan discharges shows, DOJ and ED must work harder to encourage borrowers to seek relief—and deliver on that relief when requested.”

Early data on the new guidance has been promising, but there is still significant room for improvement. In the first ten months of the process, borrowers filed 632 cases seeking to discharge their student loans. But the number of applications pales in comparison to the number of student loan borrowers struggling with decades-long debt. Given this data, it is clear that there’s more work to be done to educate borrowers on this new process and encourage borrowers struggling with bankruptcy to seek relief. 

The senators noted that the U.S. Trustee Program, the U.S. government’s bankruptcy watchdog, has broad responsibility for overseeing bankruptcy across the United States and can play a powerful role in dispelling the existing perception that student loans are non-dischargeable in bankruptcy, particularly after the implementation of the new process by DOJ and ED, consistent with the Biden administration’s efforts to help borrowers obtain relief from student loan debt. 

“USTP should redouble its efforts to educate bankruptcy attorneys, advocacy organizations, bankruptcy trustees, and individuals on how the updated process can benefit borrowers who are crushed by student debt and are contemplating filing for bankruptcy,” concluded the senators.

The senators are requesting information on USTP’s efforts to educate borrowers and others about the process.

Senator Warren has led the fight to reform our higher education system, cancel student loan debt, and hold student loan servicers accountable: 

• On May 9, 2024, Senator Warren led a growing coalition of senators in urging the Department of Education to hold student loan servicer MOHELA accountable for its failures.
• On May 7, 2024, Senator Warren and 24 members of the U.S. Senate sent a letter to Senator Tammy Baldwin, Chair of the Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, and Senator Shelley Moore Capito, Ranking Member of the Subcommittee, encouraging them to provide $2.7 billion in funding to the Office of Federal Student Aid (FSA) in fiscal year (FY) 2025.
• On May 1, 2024, Senators Warren, Carper, Kaine, and Representative Don Davis (D-N.C.) called on the Department of Defense (DoD) to release data on the Postsecondary Education Complaint System (PECS), a centralized database to track complaints against schools who participate in the Tuition Assistance (TA) and My Career Advancement Account Scholarship (MyCAA) program.
• In April 2024, Senator Warren led eight of her colleagues in sending a letter to David L. Yowan, President and Chief Executive Officer of student loan servicer Navient, urging the servicer to cancel decades-old private student loans pushed onto borrowers attending fraudulent, for-profit colleges.
• In April 2024, Senators Warren, Blumenthal, Markey, and Van Hollen released a new report: Servicing Scandals: Student Loan Servicers’ Failures During Return to Repayment, which reveals a decades-long pattern of student loan servicer incompetence and misconduct that has affected millions of borrowers nationwide.
• In April 2024, Senator Elizabeth Warren led a hearing on student loan servicer Higher Education Loan Authority of the State of Missouri (MOHELA) and its failures during borrowers’ return to repayment, including MOHELA’s mismanagement of the Public Service Loan Forgiveness program. 
• In March 2024, Senators Elizabeth Warren and Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, along with U.S. Representatives Ayanna Pressley (D-Mass.), Pramila Jayapal (D-Wash.), Raúl Grijalva (D-Ariz.), and John Larson (D-Conn.), led their colleagues in calling on the Social Security Administration (SSA), the U.S. Department of the Treasury (Treasury), and the U.S. Department of Education to end the practice of offsetting Social Security benefits to pay off defaulted student loans. 
• In February 2024, Senator Warren, Majority Leader Chuck Schumer (D-N.Y.), and Senator Bernie Sanders (I-Vt.) released a statement calling for an investigation into student loan mismanagement by MOHELA.
• In January 2024, Senators Warren, Schumer, Sanders, Senator Raphael Warnock (D-Ga.), and Senator Alex Padilla (D-Calif.), along with Representative Ayanna Pressley, Assistant Democratic Leader Jim Clyburn (D-S.C.), Representative Frederica Wilson (D-Fla.), and Representative Ilhan Omar (D-Minn.), led their colleagues in calling on the Secretary of Education Miguel Cardona to host a fourth session of the student debt negotiated rulemaking to consider relief for borrowers experiencing financial hardship.
• In December 2023, U.S. Senators Warren, Richard Blumenthal, Ed Markey,, and Chris Van Hollen (D-Md.) sent follow-up letters to student loan servicers – MOHELA, EdFinancial, Nelnet, and Maximus – raising concerns about borrowers’ problems with return to repayment, requesting information about the borrower experience, and pushing back on the servicers’ claim that budget shortfalls limit their ability provide quality customer service to millions of borrowers.
• In December 2023, Senators Warren, Schumer, Sanders, Alex Padilla (D-CA), and Representatives Ayanna Pressley (D-Mass.), Ilhan Omar (D-Minn.), and Frederica Wilson (D-Fla.) sent a letter to U.S. Secretary of Education Miguel Cardona, urging him to leverage his existing and full authority under the Higher Education Act to provide expanded student debt relief to working and middle-class borrowers.
• In August 2023, Senator Warren, Congresswoman Ayanna Pressley, Senate Majority Leader Chuck Schumer (D-N.Y.), Senators Alex Padilla and Raphael Warnock (D-Ga.) and U.S. Representatives Ilhan Omar, Jim Clyburn, and Frederica Wilson led 79 other lawmakers in a letter to President Joe Biden, urging him to swiftly deliver on his promise to deliver student debt cancellation to working and middle class families by early 2024.
• In October 2022, Senator Warren and Representative Ayanna Pressley (D-Mass.) visited communities across Massachusetts to celebrate the Biden administration’s student debt cancellation plan and help residents sign up for student loan relief. 
• In October 2022, Senator Warren called on the Department of Education to hold for-profit colleges executives accountable for scamming students out of a quality education and loading them up with student debt.
• In March 2022, Senator Warren, along with Senate Democratic Whip Dick Durbin (D-Ill.), Senator Brown and Representatives Pramila Jayapal (D-Wash.) and Mark Takano (D-Calif.), urged Secretary of Education Miguel Cardona to swiftly discharge the loans of borrowers defrauded by predatory for-profit colleges and universities, including those operated by Corinthian College. 
• In January 2022, Senator Warren, along with Senate Majority Leader Charles E. Schumer (D-N.Y.) and Representatives Jayapal, Pressley, Ilhan Omar (D-Minn.), and Katie Porter (D-Calif.) led more than 80 colleagues in a bicameral letter to the Department of Education calling for it to release the memo outlining the Biden administration’s legal authority to cancel federal student loan debt and immediately cancel up to $50,000 of debt for Federal student loan borrowers.
• In October 2021, Senator Warren, along with Senator Markey and Representative Pressley, released a report that detailed the ongoing failures of the Public Service Loan Forgiveness program for public servants in Massachusetts. 
• In April 2021, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.
  Source: Senator Elizabeth Warren