More student loan borrowers are filing for bankruptcy to offload debt

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A growing number of Americans are filing for bankruptcy in order to offload their student loan debt after a three-year payment hiatus.

The Department of Justice said in a news release published Thursday that 632 borrowers filed to use bankruptcy in order to eliminate student loans in the period from November through September, an increase from earlier levels. By comparison, the pre-pandemic average annual rate was about 480.

The spike is «significant» because there has been a pandemic-era freeze on federal student loan payments in place since March 2020. But that pause officially ended at the beginning of October, setting up a potential financial shock for millions of Americans.

The average monthly bill hovers between $200 and $299 per person, although it is even higher for some borrowers, according to the most recent Federal Reserve data.

HOUSING MARKET COULD HIT ANOTHER BUMP AS STUDENT LOAN PAYMENTS RESUME

Collectively, borrowers are to resume paying about $10 billion a month, according to an analysis from JPMorgan.

College students walk at a commencement ceremony. ((Photo by Paras Griffin/Getty Images) / Getty Images)

«The departments anticipate that this trend will continue,» the Justice Department said in the release.

The uptick in bankruptcy filings comes one year after the Biden administration introduced a new legal pathway that made it easier for borrowers to discharge federal student loan debt in bankruptcy.

The updated guidelines from the Justice and Education departments, announced in November 2022, were designed to make it easier for the government to identify whether to grant a