Victoria Vesovski
5 min read
The Trump administration is taking a harder line on Americans with student loan debt, and borrowers are feeling it from two sides.
On the one front, the U.S. Department of Education has slammed the brakes on income-driven repayment (1). In August alone, 327,955 applications were denied, according to a Dec. 15 court filing (2). For borrowers who were counting on those plans to cap their monthly bills and eventually erase remaining balances, the fallout is immediate: higher payments or a limbo-like forbearance where interest keeps piling up while relief stays out of reach.
At the same time, the government is preparing to restart wage garnishment for borrowers in default as early as January (3). Millions of people are already more than 270 days behind on their loans, putting them at risk of having part of their paycheck seized after a 30-day notice.
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Online, frustration is boiling over. One Reddit user wrote (4), “Mine will be nearly $500 a month which is literally impossible for me to pay. I just laugh at it now because simply no way I can afford that. If I tried, my parents and I would be dead before I pay even a quarter of what I owe. It’s a joke.”
Amid the tightening screws, however, a surprising escape hatch is opening. Student loans have long been considered nearly impossible to wipe out through bankruptcy — but that assumption might be outdated.
Borrowers who pursue bankruptcy relief are succeeding at rates few would have believed just a decade ago. An analysis by University of Utah law professor Jason Iuliano (5) found filers now manage to discharge some or all of their student debt 87% of the time through bankruptcy, up from 61% in 2017, largely due to a streamlined legal process introduced three years ago.
“That’s strikingly high when you think about the narrative being it’s impossible to discharge,” Iuliano told The New York Times (6). His findings were published this month in The American Bankruptcy Law Journal, following 15 years of research.
The shift comes as financial pressure on borrowers continues to grow. A survey from the Institute for College Access and Success found 42% of borrowers are forced to choose between student loan payments and basic necessities, while 20% are delinquent or already in default (7). Even though the Biden administration canceled $183.6 billion in loans for more than 5 million borrowers, broader forgiveness efforts have stalled (8).
