Student debt holders can show their economic hardships to qualify for bankruptcy and eventually student loan forgiveness|Southern Arkansas University|CC BY 2.0
An increasing number of student debt holders are filing for bankruptcy to get their debt canceled. The average annual rate of applications went from 480 pre-pandemic to 632 last year, observes the Wall Street Journal.
The rise is mainly due to the Biden administration’s removal of restrictions that discouraged Americans from disclosing bankruptcy to get rid of their student debt.
Borrowers can now show the economic hardships they face to qualify for bankruptcy and, eventually, student loan forgiveness.
The Justice Department says the number of borrowers using this route will continue to rise as more lawyers and borrowers become aware of it.
Currently, around 43 million borrowers owe the US Education Department $1.8 trillion in outstanding federal student debt.