Biden made it harder for student-loan borrowers to get rid of debt when they go bankrupt

• Only 0.1% of student-loan borrowers attempt to satisfy the tough requirements to discharge their debt through bankruptcy.
• As a Senator, Biden supported a bill that made it harder for borrowers to to do so.
• Biden's administration said it's reviewing the process, but borrowers continue to struggle in court.

Joni Adkins is a 56-year-old single mom raising three teenagers. She's nearly $11,000 deep in student-debt — but she has no degree to show for it.

In 2013, Adkins' husband quit his job and left his family to fend for themselves, according to court documents. Since he was the primary wage-earner of the household, Adkins struggled to keep up with basic rent and utility payments in addition to providing for her children. Plus, she had just taken out her first federal student loan.

She only took introductory classes at the technical and for-profit schools she attended, but due to a history of serious health conditions, including major heart arrhythmias, chronic pain from a car accident, and mental illnesses that have impaired her ability to work, her income has not been sufficient and she filed for discharge of her loans through bankruptcy in December.

"Since she never finished school, Ms. Adkins has not benefitted from her student loans," the court filing said. "Ms. Adkins' work barely enables her to maintain a minimal standard of living, and based upon her permanent mental and physical impairments, she will never be able to pay her loans."

"There is no reasonable expectation for a substantial increase in Ms. Adkins' income, as evidenced by a decade of stagnant wages living with her impairments," the filing added, in an attempt to prove there is no way her student-debt balance will be paid off.

But in February, the Education Department pushed back, filing an answer to her case stating that Adkins "failed to exhaust her administrative remedies before filing suit against the United States of America," like filing for a disability discharge.

She's just one of the many student-loan borrowers struggling to succeed in court due to bankruptcy restrictions strengthened, in part, by President Joe Biden.

Biden's role in bankruptcy legislation that strained student-loan borrowers

In 1976, Congress amended the Higher Education Act to make federal student loans nondischargeable through bankruptcy unless the borrower meets the undue hardship standard. The standard requires them to prove that they cannot maintain a minimal standard of living, their circumstances will likely not improve, and they have made a good-faith effort in repaying their debt.

Nearly three decades later, Joe Biden — then a senator serving Delaware — had a large role in making it that standard stricter. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act, and its implications for student-loan borrowers were dire. As signed into law under former President George W. Bush, the bill expanded the undue hardship requirement to borrowers with private student loans, expanding the scope of borrowers who would have to prove their impossible predicament in court.

During his 2020 presidential campaign, Biden defended his vote for the bill, saying in a Democratic primary debate that he "improved it."

"I had a choice, it was going to pass — Republican president, Republican Congress, and I offered two amendments to make sure that people under $50,000 would not be affected and women and children would go to the front of the line on alimony and support payments," Biden said in March 2020. "I did not like the rest of the bill, but I improved it, number one."

Sen. Bernie Sanders of Vermont, one of Biden's 2020 rivals who pushed for expansive student debt cancellation, blasted the 2005 bankruptcy law, along with Biden's support of it.

"That bankruptcy bill made it impossible or very difficult for people to escape from that student debt," Sanders said during the primary debate. "It was a very, very bad bill."

Lawmakers want Biden to reverse his role

According to the American Bankruptcy Law Journal, only 0.1% of student-loan borrowers even attempt to discharge their debt through bankruptcy, likely because, in part, of how difficult the process is. But over past years, lawmakers have suggested reforms to the bankruptcy code, with members of Biden's administration even promising to change how it works for struggling borrowers.

Richard Cordray, the head of the federal student-aid office, told Congress in October that he would work to reform the bankruptcy process and ensure that borrowers who need relief can access it.

"The process doesn't work well. It needs to be reformed … and we're committed to doing that," Cordray told a House education subcommittee last fall. "There have been discussions already with the Justice Department. They, too, are willing to have us revise our approach."

But since then, the department has continued opposing bankruptcy cases, and while doing so is typical legal procedure, advocates had hoped the department would stop doing so until reforms were implemented.

After withdrawing an appeal of a borrower's bankruptcy case in February, an Education Department spokesperson told Insider that the process for reviewing bankruptcy proceedings "remains ongoing," and "while the student loan payment pause remains in effect, any borrower in an adversary bankruptcy proceeding can request and receive a stay on their proceedings."

Lawmakers have some ideas for how those reviews should go. In August, Senate Majority Whip Dick Durbin and Sen. John Cornyn of Texas introduced the FRESH START Through Bankruptcy Act of 2021, which would allow borrowers to seek a bankruptcy discharge of their federal student loans after 10 years.

And in July, Reps. Steve Cohen, Danny Davis, and Eric Swalwell introduced the Private Student Loan Bankruptcy Fairness Act, which would treat private student loans the same as other forms of private debt, easing the process for bankruptcy discharge.

"It's outrageous that other people get to declare bankruptcy but students can't," Senate Majority Leader Chuck Schumer previously said.