American Bankrutpcy Institute E-newsletter of 7/23/20 Reports that Democratic Senators Push Bill Allowing Student Loans to Be Discharged in Bankruptcy, Under Certain Circumstances
Democratic Senators introduced a bill today (7/23/20) that would allow people to cancel student loan debt in bankruptcy if they can show income loss tied to economic fallout from the coronavirus pandemic, the Wall Street Journal reported. The measure from Sens. Sheldon Whitehouse (D-R.I.) and Sherrod Brown (D-Ohio) would allow student loan cancellations for people who either racked up large medical bills in the past three years or lost wages because of the coronavirus fallout. Republicans have expressed concerns that widespread student loan cancellations will cause the cost of higher education to rise, and earlier attempts to ease student loan restrictions for bankrupt borrowers have failed. Rising costs could make that education less accessible, according to those who oppose easing standards for forgiving student loan debt. A 1970s federal law requires people who take out student loans to prove an undue hardship in repaying their loans before canceling them. Over time, bankruptcy judges who have decided case by case have set a high bar. Only several thousand student-loan borrowers have tried to cancel their loans in recent years, despite more than $1.5 trillion worth of student-loan debt outstanding as of March, according to the Federal Reserve Bank of New York. Several earlier bills to ease student-loan restrictions for bankrupt borrowers have failed without support from Republicans. The bill from Sens. Whitehouse and Brown expands protections for people who file for bankruptcy, stating that people who lost income during the pandemic or because of a health care crisis should have easier access to a fresh financial start. It also has relief for homeowners who have equity in their property. The bill, called the Medical Bankruptcy Fairness Act, also has the backing of Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Tammy Baldwin (D-Wis.).
Note: There have been several bills introduced into the US Congress, over the past decade, to make it easier to discharge student loan debt in bankruptcy. NONE of those bills has become law. NONE of those bills even came close to becoming law.