Judge Sarah Sharer Curley, retired from the U.S. Bankruptcy Court for the District of Arizona, has raised concerns about the impact of recent changes to student loan policy on bankruptcy rates. In her new book examining debt and the bankruptcy system, Curley discusses cases she witnessed during her nearly three decades on the bench, including a 2012 case involving a 73-year-old woman carrying over $584,000 in student loan debt accumulated since the 1970s.
According to data from the Administrative Office of the U.S. Courts, personal bankruptcy filings exceeded 500,000 in 2025, representing a nearly 50% increase compared to three years prior. Curley attributes much of the debt crisis not to fraud or mismanagement by borrowers, but to external economic pressures. She notes that while unemployment figures remain low, employment quality has deteriorated significantly, with many workers employed as independent contractors lacking adequate benefits or relying on multiple part-time positions to meet expenses.
Curley characterizes recent federal education policy changes, particularly a bill that passed in July 2025, as problematic for student loan borrowers. She explains that the legislation imposed unrealistic caps on federal loan limits, forcing students to seek private financing at substantially higher interest rates. She provides an example in which a medical student requiring $300,000 in loans could face interest rates exceeding 16% if they have lower credit scores, resulting in monthly payments approaching $5,000 and total interest costs exceeding $300,000.
The former judge indicates that settlements between borrowers and the federal government have become more difficult to reach, particularly following changes to the Education Department. She predicts that the combination of stricter loan policies and high private lending rates will likely drive bankruptcy filing rates higher in the coming period.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI