An increasing number of Americans are filing for bankruptcy to offload their student loan debt following a three-year payment hiatus. This month, the Department of Justice reported that 632 borrowers filed for bankruptcy to help eliminate student loans from November through September. The average monthly bill payment is around $200 and $299 per person. Although, for some borrowers, the payments are even higher. Generally, borrowers are to continue paying roughly $10 billion a month, according to an analysis from JPMorgan. Bankruptcy filings grew after the Biden Administration introduced a new legal pathway that made it more manageable for borrowers to discharge federal student loan debt in bankruptcy. Congress has set a higher bar for discharging student loan debt, unlike medical or credit card debt. These filings require borrowers to demonstrate they will suffer “undue hardship” if the debt is not discharged. Borrowers must now demonstrate they meet three criteria to offset their student loan debt. First, they must show they cannot repay the loan currently. Second, they are unable to repay the loan in the future, and third, they made a good faith effort to repay the loan. Moreover, earlier this year, the Supreme Court struck down Biden’s student loan forgiveness plan that would have wiped out up to $20,000 in loans per borrower. Nevertheless, the White House expressed other efforts to reduce student loan debt, including erasing $127 billion of debt owed by about 3.6 million borrowers.
Source: More Student Loan Borrowers are filing for bankruptcy to offload debt
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