Judge Warns Trump Student Loan Law Will Drive Bankruptcies — SkimNews
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- Sarah Sharer Curley, the first woman appointed to the U.S. Bankruptcy Court for the District of Arizona, published "The Price of Forgiveness: Debt, Bankruptcy, and the Future of Fairness in America" this month, drawing on nearly three decades presiding over bankruptcy cases.
- Curley recounted a 2012 case of a 73-year-old woman carrying a federal student loan balance of more than $584,000 dating to the 1970s, living on Social Security alone, whom she described as credible but unable to discharge the debt.
- U.S. personal bankruptcy filings topped 500,000 in 2025 — an almost 50% increase from three years prior — according to the Administrative Office of the U.S. Courts.
- Curley called Trump's July 2025 'big beautiful bill' an 'attack' on student loan borrowers, saying its 'unrealistic' federal loan caps will push students to private lenders charging up to 16% interest — producing monthly payments of $5,017 and $302,040 in interest on a typical $300,000 medical school loan.
- Curley said the U.S. Department of Education was 'gutted' in 2025, leaving 'few, if any' employees able to approve debt modifications, making bankruptcy settlements harder to reach than they were under the Biden administration.
- She argued that 2005 amendments to bankruptcy law, pushed by the creditor lobby without evidence of widespread fraud, turned the process 'tortuous' and leave many filers feeling they have personally failed.
Why it matters: Curley says the 2025 loan caps will push medical students toward private loans at up to 16% interest — $5,017 a month on a $300,000 balance — while a gutted Education Department no longer has the staff to approve the debt modifications that helped some borrowers under Biden, removing the institutional backstop for distressed student debtors.
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