National Association of Consumer Bankruptcy Attorneys (“NACBA”) Applauds Introduction of H.R. 4444 (Titled: “The Student Loan Bankruptcy Improvement Act of 2025”) in the US House of Representatives
7/18/25 National Association of Consumer Bankruptcy Attorneys (“NACBA”) Applauds Introduction of H.R. 4444 (Titled: “The Student Loan Bankruptcy Improvement Act of 2025”) in the US House of Representatives, which proposes to make more bankruptcy debtors eligible to discharge their student loans in bankruptcy:
Washington, D.C. — The National Association of Consumer Bankruptcy Attorneys (NACBA) proudly announces its strong support for H.R. 4444, the Student Loan Bankruptcy Improvement Act of 2025, introduced by Congressman J. Luis Correa (CA-46). This vital legislation takes long-overdue action to restore fairness and access to justice for millions of Americans burdened by student loan debt.
For decades, the “undue hardship” standard, particularly as interpreted through the outdated Brunner test, has made it virtually impossible for borrowers to discharge student loans in bankruptcy. Enacted in an era when student loan debt averaged around $5,200 (adjusted to $14,000 in today’s dollars), the Brunner standard has not kept pace with economic realities. In contrast, today’s borrowers carry an average of over $37,000 in student loan debt.
“The existing legal standard is not only outdated—it’s unjust,” said Richard Nemeth, President of NACBA. “Only 0.01% of student loan borrowers succeed in discharging their loans through bankruptcy under the current rules. That is a system that’s fundamentally broken.”
H.R. 4444 addresses this crisis by amending Section 523(a)(8) of the U.S. Bankruptcy Code to remove the word “undue” from the hardship standard. This change would allow judges to apply a more reasonable and modern evaluation of a debtor’s financial condition, one that reflects current economic challenges while upholding key protections against abuse.
The legislation preserves existing safeguards, including means testing, asset limits, and oversight under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. By maintaining these protections, the bill balances debtor relief with responsible guardrails, reducing concerns over moral hazard.
According to recent data from the Federal Reserve and the U.S. Department of Education, more than six million federal student loan borrowers are over 90 days delinquent, many at risk of default, wage garnishment, and long-term financial ruin. Without reform, these individuals remain locked out of the very system designed to offer a second chance.
“This bill restores the core promise of bankruptcy—a fresh start for the honest but unfortunate debtor,” said Nemeth. “NACBA is proud to support this legislation and urges swift passage in Congress.”