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Bipartisan bill in Congress addresses student loans, bankruptcy

On Behalf of | Aug 26, 2021 | Bankruptcy

Some 45 million Americans owe a combined $1.7 trillion on their student loans. For many people considering bankruptcy, the strict limitations placed on the ability to discharge their student loans has been highly frustrating. Currently, they have to prove that their student loan payments are causing them “undue hardship” to get some relief. 

Thus far, Congress hasn’t been able to make any progress in making it easier to discharge student loan debt in bankruptcy. However, there’s some cautious optimism that a bipartisan bill called the FRESH START Through Bankruptcy Act of 2021 could succeed.

What does the proposed legislation do?

The proposed legislation would allow borrowers struggling financially to get their student loan debt discharged in bankruptcy if the debt is at least ten years old. Those with loans less than ten years old would still have to show “undue hardship.”

Sen. Dick Durbin, who’s one of the bill’s sponsors, says, “Student loan debt follows you to your grave….Our bipartisan bill finally gives student borrowers – some who were misled into taking out costly loans by predatory for-profit colleges – a chance to get back on their feet when they have no other realistic path to repay their loans.”

Over $8 billion in student loans have been canceled this year

Congressional efforts to cancel student loan debt outside of bankruptcy haven’t met with success. However, the Biden administration has thus far canceled over $8 billion in federal student loans. The only borrowers eligible for this cancelation are those who were defrauded by now-closed for-profit colleges and universities and those who are permanently and/or totally disabled. 

If your student loan debt has caused you to get seriously behind on other debt, bankruptcy may still be able to help you stop struggling financially. Your best bet is to learn more about your options.

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