July 27, 2023

Warren Presses DOJ on Updates to New Guidance on Discharging Student Loans in Bankruptcy

DOJ Issued Updated Student Debt Bankruptcy Guidelines in November 2022 After Calls from Warren and Lawmakers to Establish Fairer, More Transparent Bankruptcy System

Text of Letter (PDF)

Washington, D.C. – United States Senator Elizabeth Warren (D-Mass.) sent a letter to Attorney General Merrick Garland requesting an update on the impact of the Department of Justice’s (DOJ) November 2022 guidance on discharging student loans in bankruptcy, which sought to help provide student loan borrowers a meaningful path to financial recovery. Senator Warren’s letter comes as the Supreme Court played politics and struck down President Biden’s initial plan to provide up to $20,000 in student debt cancellation for over 40 million Americans and the Department of Education announced that interest on student loans will begin accruing in September 2023, and that it will end its pause on student loan payments in October 2023. 

“The DOJ’s November 2022 guidance brought long-awaited changes that could help establish a fairer and more transparent bankruptcy system that offers student loan borrowers a meaningful path to financial recovery.  Further, I am supportive of the Biden Administration’s recent announcement of a 12-month on-ramp transition period to support borrowers ‘smoothly and successfully return to repayment.’ If these actions are implemented concurrently, they will ‘help borrowers avoid the harshest consequences of missed, partial, or late payments’ while the Department initiates a regulatory process to provide debt relief,” wrote Senator Warren. 

Student loan borrowers who struggle with debt have historically faced challenges using the bankruptcy system to discharge their student loans for financial recovery. Between 2015 and 2020, roughly 250,000 borrowers filed for bankruptcy annually, but of those, less than one percent saw their student loan debt discharged. 

“The November 2022 guidance issued by the DOJ was an important step towards reforming the broken bankruptcy system… In its guidance, the DOJ recognized that borrowers ‘have been deterred from seeking discharge of student loans in bankruptcy due to the historically low probability of success.’ Therefore, this updated guidance is designed to allow the DOJ and ED to facilitate the objective of more discharges and provide hope for borrowers seeking bankruptcy as a viable pathway to financial freedom.  In fact, one of the explicit goals of the 2022 guidance is to ‘increase the number of cases where the government stipulates to the facts demonstrating a debt would impose an undue hardship and recommends to the court that a debtor’s student loans be discharged,’” continued Senator Warren. 

In the letter, Senator Warren noted that this new process appears to be moving towards the DOJ's goal. In recent remarks to the National Association of Consumer Bankruptcy Attorneys, Associate Attorney General Vanita Gupta highlighted that the DOJ  has supported full or partial discharge of student loan debt in “the overwhelming majority” of cases considered as of April 2023 that utilized the new process. 

“I appreciate the Administration’s recognition that establishing a fair and accessible discharge process will help borrowers crushed by student loan debt, and I believe the new bankruptcy guidance has the potential to provide a meaningful avenue for relief. I further support DOJ’s plan to evaluate the guidance one year into the guidance’s operation.  However, with the looming threat of restarting student loan payments, and given that more than eight months have now passed since DOJ’s announcement, I am writing to seek an update on the current implementation and effects of the DOJ guidance,” concluded Senator Warren. 

Given these concerns, Senator Warren is asking the DOJ to provide a detailed update on the status and implementation of its 2022 student debt bankruptcy guidance by August 9, 2023. 

Senator Warren is a national expert on bankruptcy and has led the fight to hold loan servicers and the federal government accountable to delivering student debt relief for borrowers struggling with debt: 

  • In July 2023, Senators Warren, Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio), Edward Markey (D-Mass.), Bob Menendez (D-N.J.), and Chris Van Hollen (D-Md.) sent letters to the federal loan servicers – Higher Education Loan Authority of the State of Missouri, Nelnet, EdFinancial, and Maximus Federal Services Inc. – requesting information about their plans to support the more than 40 million federal student loan borrowers who will soon resume payments on their student loans. 
  • In July 2023, Senator Warren sent a letter to the Department of Education, raising concerns ahead of student loan payment pause expiration over plans to resume collecting on student loans and sharing recommendations to revamp the department’s student debt collection program.
  • In April 2023, Senator Warren led 16 senators in sending a letter to the Chair and Ranking Member of the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies requesting the committee provide $2.7 billion in Fiscal Year (FY) 2024 to fund the Office of Federal Student Aid
  • In February 2023, Senator Warren released a new report based on her investigation into how efforts by Republican officials and special interests to block the President’s plan to cancel up to $20,000 in federal student loan debt would affect Americans.
  • 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 September 2022, Senator Warren and Representative Pressley sent a letter to federal student loan servicers to inquire about the steps they are taking to ensure borrowers are receiving timely information about President Biden’s debt cancellation plan. 
  • In September 2022, Senator Warren sent a letter to the Department of Justice (DOJ) urging DOJ to issue and implement updated student debt bankruptcy guidance without delay following the Biden-Harris administration’s historic decision to cancel up to $20,000 in student debt for up to 43 million borrowers and overhaul the student loan system.
  • In August 2022, Senator Warren recognized the Department of Education for protecting students and taxpayers by taking action to revoke ACICS status as an accreditor.
  • Senator Warren, along with Senate Democratic Whip Dick Durbin (D-Ill.), Senator Brown and Representatives Pramila Jaypal (D-Wash.) and Mark Takano (D-Calif.), urged Secretary of Education Miguel Cardona, urging the Department of Education (ED) to swiftly discharge the loans of borrowers defrauded by predatory for-profit colleges and universities, including those operated by Corinthian College. 
  • 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.
  • Senator Warren, along with Senate Majority Leader Schumer and Representative Pressley released new analysis showing that resuming student loan payments would strip $85 billion every year from the economy.
  • Senator Warren, along with Senators Van Hollen, Blumenthal, and Smith sent letters to four federal loan servicers, requesting information on their plans to support borrowers when student loan payments resume. 
  • Senator Warren, along with Senators Brown, Blumenthal, Smith, and Van Hollen sent a letter to Maximus, the company that is assuming Navient’s federal student loans servicing contract, questioning its troubling history and seeking assurances that borrowers will receive appropriate services and protections during the transition. 
  • Senator Warren, along with Senators Brown, Blumenthal, Smith, Van Hollen, Booker, Sanders, Tammy Baldwin (D-Wis.), and Markey sent a letter to the Department of Education urging Secretary Cardona to use his authority to automatically remove all student loan borrowers in default.
  • Senator Warren, along with Senators Van Hollen, Blumenthal, Brown, Smith, Markey, and Robert Menendez (D-N.J.) sent letters to the heads of Pennsylvania Higher Education Assistance Agency, Granite State, and Navient calling on them to correct past errors with borrowers’ accounts and address growing concerns over their preparedness to transfer millions of borrowers to new servicers. 
  • 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. 
  • At a hearing in July 2021, Senator Warren pushed for borrower protections after a major student loan servicing shakeup.
  • In July 2021, Senator Warren released a statement regarding the end of the Pennsylvania Higher Education Assistance Agency's (PHEAA) contract servicing student loans with the Department of Education.
  • In June 24, 2021, Senators Warren and John Kennedy (R-La.) called on PHEAA CEO to address concerns about false and misleading statements made during a subcommittee hearing on student loans, which was chaired by Senator Warren. 
  • In May 2021, Senator Warren led her colleagues in sending a letter requesting information about the steps the Department of Education and the Office of Federal Student Aid (FSA) are taking to help transition millions of federal student loan borrowers back into repayment ahead of the scheduled end to the pause on student loan payments and interest in September.
  • 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.
  • In April 2021, at her first hearing as chair of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren called out PHEAA for its mismanagement of the Public Student Loan Forgiveness Program.
  • In April 2021, Senator Warren also questioned Jack Remondi, CEO of Navient, on the company's long history of abusive and misleading behavior towards borrowers and their profiting off the broken student loan system.
  • In March 2021, Senators Warren and Menendez applauded the passage of their Student Loan Tax Relief Act as part of the American Rescue Plan. 
  • In December 2020, Senator Warren introduced the Consumer Bankruptcy Reform Act and in 2019, co-led the Student Borrower Bankruptcy Relief Act with Senator Durbin to make student loans dischargeable through bankruptcy. 
  • In May 2019, Senators Warren and Durbin and Representatives Jerrold Nadler (D-N.Y.), John Katko (R-N.Y.) and Joe Neguse (D-Colo.), introduced the Student Borrower Bankruptcy Relief Act of 2019, which would give Americans overwhelmed by student loan debt the option of obtaining meaningful bankruptcy relief.