A growing number of student-loan borrowers are slowly benefitting from a new process that would get rid of their debt in court

• The Education and Justice Departments said their new bankruptcy guidance for student-loan borrowers is a success.
• They said 632 borrowers have filed for relief in the first 10 months of the new process.

Over the past year, a growing number of student-loan borrowers have tapped into a new process to help them get rid of their debt in court. But there's still a ways to go.

On Thursday, the Education and Justice Departments announced a "successful first year" of its updated guidance to help borrowers discharge their debt through bankruptcy. In November 2022, the two agencies put forth a coordinated effort to make it easier for borrowers who cannot repay their loans to get relief through bankruptcy by allowing them to complete self-attestation forms to help the Justice Department recommend relief to a judge without having to undergo time-consuming investigations.

Prior to the guidance, borrowers had to prove the "undue hardship" standard for relief, in which they have to show that they cannot maintain a minimal standard of living, that their circumstances aren't likely to improve, and that they have made a good-faith effort to repay their debt. While that standard still exists, the new guidance makes it more standardized to ensure equal treatment for anyone seeking relief.

According to the departments, 632 cases were filed in the first ten months following the new guidance, and 97% of those borrowers filed voluntarily using the new process. The press release also said that in 99% of the cases where courts have entered judgments, the court agreed to a full or partial discharge for the borrower.

"One year ago, we set out to simplify and improve the process for student loan borrowers in bankruptcy," Associate Attorney General Vanita Gupta said in a statement. "I am thrilled that our one-year review indicates that our efforts have made a real difference in borrowers' lives by ensuring student-loan discharges are more accessible to eligible borrowers."

However, the press release did not include data on the exact number of borrowers that have actually received discharges under the new guidance, and the Justice Department told Insider it was not able to share that data at this time.

While the department noted in its press release that it has conducted training events for bankruptcy attorneys to help borrowers make use of this new guidance, Aaron Ament, president of borrower protection group Student Defense, told Insider that more needs to be done.

"The progress we are seeing is life changing for some borrowers, but the number of actual bankruptcy discharges appears to be really low," Ament said. "There are also long delays in agency review of the attestation forms. The government needs to continue improving the process to see the systemic change we hope for."

A slow moving process for relief

In August, Student Defense obtained data through the Freedom of Information Act that found that fewer than 45 borrowers have gotten a full or partial debt discharge through bankruptcy since the new guidance.

An Education Department spokesperson told Insider at the time that "the guidance is still relatively new and it represents an important step forward and provides clearer, fairer, and more practical standards to guide recommendations for student debt discharges during bankruptcy proceedings."

"What is clear is that qualifying borrowers are using it and getting relief faster and with much less cost and burden than before, but the process still takes time and is largely driven by the legal system," the spokesperson said.

While the Justice and Education Departments said in their latest press release that the 632 cases filed marked "a significant increase" from recent years, a 2020 paper from the Duke Law Journal found that about 250,000 borrowers had been filing for bankruptcy annually between 2015 and 2020.

The Justice Department said it would not be amending the guidance at this time "because the new process is working well," but both Democratic and Republican lawmakers have been pushing to make the process more accessible for borrowers. Massachusetts Sen. Elizabeth Warren sent a letter to Attorney General Merrick Garland in July requesting updated data following the new guidance, and GOP Florida Gov. Ron DeSantis even said he would support borrowers getting relief through bankruptcy.

"The reality is we've had a generation of students go deep into debt, and some of them end up with degrees in things like zombie studies, which are just not making a difference," DeSantis said during August remarks, adding that "student loans should be dischargeable in bankruptcy."