Former bankruptcy judge warns student loan bill may raise filings

Sarah Sharer Curley, the former U.S. Bankruptcy Court judge for the District of Arizona, argues that recent federal legislation will likely drive up personal bankruptcy filings by making student debt harder to manage. In her new book, "The Price of Forgiveness: Debt, Bankruptcy, and the Future of Fairness in America," Curley contends that the current legal framework fails to provide meaningful relief to indebted Americans, a situation she says is exacerbated by policy shifts under the current administration.

According to data from the Administrative Office of the U.S. Courts, more than half a million personal bankruptcy cases were filed in 2025, representing an almost 50% increase from three years prior. Curley attributes part of this surge to the changing economic landscape, where many workers are employed as independent contractors with few benefits or are forced to work for multiple employers to meet weekly financial needs. She notes that while wages have risen, the quality of employment remains low, leaving many households vulnerable to unexpected events such as job loss or chronic illness.

The former judge specifically criticizes the federal student loan changes included in legislation passed in July 2025, which she describes as an "attack" on borrowers. The law established new federal loan caps, which Curley says may push students toward private lenders with higher interest rates. She illustrates this with a hypothetical medical student requiring a $300,000 loan; if that borrower has a lower credit score, the interest rate could reach 16%. Over a 10-year period, this would result in a monthly payment of $5,017 and total interest costs of $302,040. Curley states that such expenses are unsustainable for most individuals and that these financial pressures will most likely lead to an increase in bankruptcy filings.

Curley also highlights the administrative hurdles facing borrowers seeking debt relief. She notes that under the previous administration, the U.S. Department of Education attempted to work out repayment plans or forgive portions of debt for borrowers who could not pay. However, following significant staff reductions at the Department in 2025, there were few employees available to approve debt modifications. This reduction in capacity has made it more difficult for borrowers to reach settlements with the federal government. In one case Curley presided over in 2012, a 73-year-old woman with a student loan balance exceeding $584,000 sought relief. The federal government refused to settle, and the assigned law firm did not adequately investigate her financial status. Curley ultimately granted the woman credit for seven years of public service in San Diego County, reducing her required repayment period to three additional years.

The judge emphasizes that the bankruptcy process itself remains "tortuous" due to changes made to the law in 2005, which she says were driven by creditor lobbying efforts without sufficient evidence of widespread fraud. These changes require individuals to complete numerous forms and attend multiple hearings, keeping them in a state of prolonged stress. Curley observes that many filers view their inability to resolve financial problems as a moral failure, often feeling traumatized by the process. She concludes that while large financial institutions receive legal accommodations, the system does not extend similar flexibility to individuals struggling with insurmountable debt.