The Biden administration is abruptly withdrawing its attempt to block a major court ruling that could protect student borrowers, according to a new statement provided to The Daily Poster. The announcement comes 48 hours after The Daily Poster broke the news that the administration had moved to appeal the ruling, which could help the poorest borrowers who are being bankrupted by education debt.
“This January 28 notice of appeal will soon be withdrawn,” a Department of Education spokesman said in the statement. “The Department of Education has indicated publicly that it is reviewing current bankruptcy policies, a process which remains ongoing. 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.”
Following the statement to The Daily Poster, Under Secretary of Education James Kvaal tweeted Friday morning: “We will withdraw the appeal in the Wolfson bankruptcy case & review how we handle future claims.”
On Wednesday, The Daily Poster first reported that the administration had moved to appeal a Delaware court ruling that eliminated nearly $100,000 in student loan debt for a borrower. The borrower, a 35-year-old epileptic man, had won a rare victory in a bankruptcy system that is rigged against student loan borrowers. The story — which was part of our ongoing coverage of student debt — was quickly picked up by other news outlets.
If the administration had won on appeal, it could have fortified a legal precedent precluding many borrowers from having their student loans reduced or eliminated through bankruptcy courts.
“Obviously, this is welcome news for one borrower and we are glad to see the Department taking this step,” Dan Zibel, Vice President and Chief Counsel for the National Student Legal Defense Network, a nonprofit that represents students in cases related to education and student debt, told The Daily Poster. “But this situation highlights how the Department must immediately review its practices and positions with respect to bankruptcy in student loan cases."
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