Bankruptcy may be more challenging for student loan borrowers under Trump.

• With the election of Donald Trump, the Biden administration's more lenient policy toward student loan borrowers in bankruptcy court may be discontinued.
• Malissa Giles, a consumer bankruptcy attorney in Virginia, stated that she believes there will be a stricter approach to relief.

Over the past few years, more federal student loan borrowers have been able to have their debt discharged in bankruptcy due to new guidance issued by the Biden administration.

Experts warn that the more lenient policy may be at risk when President-elect Donald Trump takes office in January.

Here's what borrowers need to know.

'A tightening in the approach of relief'

Malissa Giles, a consumer bankruptcy attorney in Virginia, believes that the Trump administration's approach to relief may become stricter when they take office.

Giles stated that she intends to be more cautious in recommending bankruptcy to clients with student debt.

"Giles stated that they are unlikely to submit those cases that require more effort at present, as he does not want individuals to invest money in them if there is a chance they may not be successful."

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Mark Kantrowitz, a higher education expert, anticipates a shift in the current approach.

Kantrowitz stated that the Trump Administration is likely to revoke the Biden administration's guidance on looser rules for student loan borrowers in bankruptcy.

Seattle bankruptcy lawyer Latife Neu expressed uncertainty about whether student loan borrowers would face increased difficulty in filing for bankruptcy under the Trump administration.

"Neu stated that the higher bar for student loan borrowers to have their debt discharged in bankruptcy is a "defective policy," with a surprising level of agreement across the political spectrum."

The Trump transition team did not provide a comment when CNBC requested one.

How bankruptcy got easier for student loan borrowers

In autumn 2022, the U.S. Departments of Education and Justice issued revised bankruptcy directives to facilitate the discharge of student loans for distressed borrowers in court.

In a typical bankruptcy proceeding, it was challenging, if not impossible, for individuals to discharge their education debt.

In the 1970s, lawmakers introduced a provision that required student loan borrowers to wait at least five years after starting repayment before filing for bankruptcy. This was done to address concerns that students would accumulate a significant amount of debt and then attempt to discharge it after graduation.

In 1990, the waiting period for discharging student debt was increased to seven years. Almost a decade later, the rules were changed again, requiring proof of "undue hardship" to discharge student debt.

The lack of clarity regarding the term "collateral consequences" from Congress resulted in unfairness in the courts, as stated by lawyers and advocates.

Experts say that the Biden administration's recent approach to student loans in bankruptcy court is similar to how other types of debt are treated. Borrowers can now fill out a 15-page form to detail their financial struggles and make their case for a fresh start.

Over 630 student loan borrowers filed for bankruptcy in the first 10 months of the new policy, marking a "significant increase" compared to previous years, the Biden administration announced.

A majority of borrowers seeking discharge have received full or partial discharges, according to the statement.