A student-loan borrower just got $78,000 in debt wiped out in court after 3 decades of repayment following Biden's new bankruptcy guidance

• Zena Dodson, a borrower with $78,000 in student debt, just got her loans discharged via bankruptcy.
• She had been paying off her loans for three decades with no improvement to her financial situation.
• The relief follows new Education and Justice Department reforms to the bankruptcy process last year.

A student-loan borrower who has been burdened by her debt load for over three decades finally got relief.

On Tuesday, Student Defense — a group advocating for borrower protections — and Latife Neu of Neu Law announced that the Western District of Washington at Seattle Bankruptcy Court discharged $78,000 in student loans for Zena Dodson following new bankruptcy guidance the Education and Justice Departments announced last year.

According to the legal filings, Dodson attended Griffin Business College, a for-profit school in Seattle, in 1988, and she took out $18,955 in student loans for that education. The school shut down in 1993 following lawsuits from a number of students who said they were misled by the school. Upon reentering repayment in the early 1990s, Dodson suffered financial hardship and the late fees and surging interest left her with her most recent balance totaling $78,715.

Dodson, now 59, supports who two adult daughters and her granddaughter. She has worked in public service for the majority of her 30-year career and "uses her best effort to minimize her expenses," per the legal filing.

"She minimizes entertainment and transportation expenses, and she avoids expensive habits or pastimes. She cuts coupons for groceries and even restricts her food intake to stretch the family food budget," the filing said. "Despite maximizing her income and minimizing her expenses, Ms. Dodson is currently unable to repay her student loans without undue hardship to herself and her dependents, given her income and family responsibilities. She is not able to make meaningful payments on her federal student loan balance while maintaining a minimal standard of living."

While Dodson was granted a student-loan discharge in 2014, federal law at the time prevented her loans from being wiped out in those proceedings. But Biden's Education and Justice Department guidance last year streamlined the process for student-loan borrowers to receive relief through bankruptcy, which helped get Dodson her relief. 

Leading up to the guidance, borrowers had to prove the "undue hardship" standard, in which borrowers have to show that they cannot maintain a minimal standard of living, that their circumstances aren't likely to improve, and that they have made a good-faith effort to repay their debt. That standard has proved very difficult to meet in court,  and the new guidance eased the process for borrowers by allowing them to complete a self-attestation form to help the departments assess their discharge request.

While the undue hardship standard remains, the guidance establishes clear standards to allow all borrowers to be evaluated equally while saving the Justice Department time it would otherwise spend on time-consuming investigations.

Student Defense President Aaron Ament said in a statement following Dodson's discharge that he's "proud to have fought for these long overdue reforms, and we're happy to see them in practice."

"For too long, the federal government was fighting borrowers in bankruptcy court based on overly-stringent guidance," Ament said. "We're hopeful these new policies give more student loan borrowers like Ms. Dodson a chance at a financial fresh start."