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Miguel Cardona

U.S. Secretary of Education Miguel Cardona answers questions during a daily press briefing at the White House in Washington, D.C. on August 5, 2021. (Photo: Win McNamee/Getty Images)

Coalition Urges Biden Admin to Stop Fighting Student Debtors in Bankruptcy Court

"The stubborn commitment to this flawed policy is contrary to the department's mission of protecting students from fraud and ensuring that higher education is a launching point, not a stumbling block," says a new letter.

Kenny Stancil

A coalition of 17 progressive advocacy groups on Thursday sent a letter urging U.S. Secretary of Education Miguel Cardona to immediately stop opposing individuals who are seeking to discharge their student loan debt in bankruptcy court.

"[The DOE] should be a leading voice for students, and should refrain from taking legal positions that raise the bar for distressed borrowers."

The Department of Education (DOE) "should be a leading voice for students, and should refrain from taking legal positions that raise the bar for distressed borrowers," states the letter, whose signatories include several organizations that have called on the Biden administration to cancel student debt.

The letter, which comes amid growing scrutiny of the White House's treatment of borrowers, asks the DOE to "review all positions taken" in cases pertaining to student debt relief through bankruptcy during Cardona's tenure, and "work with borrowers to assure a just outcome."

Although President Joe Biden spent years as a senator siding with lenders and making it harder for Americans to reduce educational loan repayment obligations in court, he promised last year to "allow for student debt to be relieved in bankruptcy," which would help give borrowers drowning in bills a fresh financial start.

Nevertheless, The Daily Poster revealed on February 2 that the Biden administration had moved to overturn a federal judge's decision to eliminate almost $100,000 in student debt held by 35-year-old Ryan Wolfson, a man with epilepsy who has difficulty securing full-time employment.

Two days after the story went viral and sparked a public outcry, the DOE announced that it would withdraw its notice of appeal in Wolfson's case. The agency added that "any borrower in an adversary bankruptcy proceeding can request and receive a stay" during the department's review of current policies, which has been ongoing since last July.

However, less than a week later, the Biden administration filed another notice of appeal in a bid to block a federal judge's ruling providing Monique Wheat—a mother of three with an annual income of roughly $21,000—with more than $100,000 in student debt relief, The Daily Poster reported Thursday.

Following another round of backlash that day, the DOE dropped its appeal in Wheat's case as well, prompting investigative journalist Julia Rock to ask: "Does this signal a policy change at the agency?"

"It is disappointing that the department seems to be deciding whether to fight borrowers based solely on press coverage," Dan Zibel, vice president and chief counsel for the National Student Legal Defense Network, told the news outlet.

"There are countless cases of student borrowers in bankruptcy who the department is still fighting, but their stories haven't been told in the press," he added.

In its letter to Cardona, the coalition—which includes the Revolving Door Project, the Debt Collective, and the American Federation of Teachers—says that the Biden administration's recently jettisoned appeals suggest that the DOE is "moving slowly to implement" promised reforms and "does not have a complete grasp on the cases currently pending."

"The department's opposition of these student debt discharges appears at odds with greater efforts to enact meaningful reform."

While welcoming the pair of reversals, the coalition remains "deeply concerned that the department is fighting other student loan borrowers seeking a fresh start through bankruptcy. We are similarly concerned with arguments made in court by the department in recent months, which purport to push the 'undue hardship' standard to levels not envisioned by Congress."

Even the "statement that borrowers can request a stay shifts the burden to the borrower to 'hang tight' while the department takes its review," says the letter.

"Under your watch," the coalition tells Cardona, "the department has a demonstrated record of successfully opposing discharge requests, leaving those borrowers simply without any recourse" at a time when "there are bipartisan legislative efforts currently underway that would provide a clearer path forward for borrowers."

"Given the obvious appetite for reform—both from Congress and the Biden administration—the department's opposition of these student debt discharges appears at odds with greater efforts to enact meaningful reform," the letter continues.

The coalition further argues that "the stubborn commitment to this flawed policy is contrary to the department's mission of protecting students from fraud and ensuring that higher education is a launching point, not a stumbling block, for students' financial mobility."

Withdrawing opposition to student debt relief through the bankruptcy process in every open case "is an immediate actionable step the department can take to indicate that it is reviewing its bankruptcy policy in good faith, with an eye towards substantial reform," adds the coalition.

The letter comes as Biden faces mounting pressure from economic justice advocates and congressional Democrats not only to deliver on his modest campaign promises regarding student loan relief but to go further by canceling at least $50,000 in student debt per borrower.

Biden, who has suggested erroneously that he lacks the executive authority to broadly cancel student debt without legislation, asked the DOE last April to prepare a memo on the subject.

In October, it was revealed that the Biden administration received the memo on April 5—thanks to documents and internal emails obtained by the Debt Collective through a Freedom of Information Act request.

Rep. Ilhan Omar (D-Minn.) and other members of the Congressional Progressive Caucus urged Cardona to release the memo by October 22, but the Biden administration has so far refused to make it public. Last month, 85 Democratic lawmakers demanded that the president share the concealed document.

Despite the White House's intransigence, legal experts say the Higher Education Act of 1965 clearly empowers Biden to direct Cardona to eliminate student debt for all 45 million borrowers in the United States.

The Debt Collective, as Common Dreams reported last year, has drafted an executive order for the president directing Cardona to "cancel all obligations to repay federal student loans," which would save borrowers hundreds of dollars per month and boost the nation's gross domestic product by more than $173 billion in the first year alone.

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