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Student Defense Welcomes Department of Education’s Pledge to Reform Bankruptcy Policy

FOR IMMEDIATE RELEASE:
October 28, 2021 

MEDIA CONTACT:
press@defendstudents.org | 202-734-7495

Student Defense Welcomes Department of Education’s Pledge to Reform Bankruptcy Policy
Ament: Department must work to “swiftly turn this important promise into policy”

Student Defense President Aaron Ament today released the following statement in response to news that the U.S. Department of Education plans to reform its treatment of student loan borrowers who file for bankruptcy:

“This is welcome news. For too long, the Department of Education has aggressively pursued struggling student loan borrowers while letting for-profit colleges and their executives off the hook. It’s time to flip the script. We look forward to working with Mr. Cordray and Secretary Cardona to swiftly turn this important promise into policy.”


Background
At a House Committee on Education and Labor hearing yesterday, Federal Student Aid chief operating officer Richard Cordray told members of Congress, “The [bankruptcy] process doesn’t work well. It needs to be reformed … and we’re committed to doing that.”

Earlier this year, Student Defense President Aaron Ament and Vice President and Chief Counsel Dan Zibel co-authored a Minnesota Law Review essay with Cardozo School of Law Professor Pamela Foohey on the challenges students face when attempting to have their student loans discharged in bankruptcy court. The essay outlines reforms that the Department of Education can enact to alleviate the burdens on borrowers — having a presumptive position of “no contest” in bankruptcy cases and standardizing and streamlining the Department’s debt discharge criteria.

Student Defense also recently released a report, The Missing Billion, detailing how the Department of Education has been aggressively contesting undue hardship claims from distressed borrowers even as it allowed institutions and their officials to avoid paying over $1 billion in liabilities owed to the Department. In recent months, during the COVID-19 economic crisis, the Biden Department of Education opposed the discharge of numerous borrowers in extreme financial distress. In one case, the Department argued that a student borrower tithing to her church was evidence that her financial circumstances were not sufficiently dire to merit a discharge.

 

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