Last week, Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Al Franken (D-MN) joined Representatives Steve Cohen (D-TN) and Danny Davis (D-IL) in introducing legislation that would permit private student loan debt to be dischargeable in bankruptcy court. The bills, S. 3219: The Fairness for Struggling Students Act in the Senate and H.R. 5043: The Private Student Loan Bankruptcy Fairness Act in the House, would restore fairness to laws governing student loan bankruptcy.
“This legislation ends the special treatment private student lenders have enjoyed for years at the financial and personal expense of debt-ridden college graduates,” said USSA President Gregory Cendana. “If a struggling individual can file for bankruptcy on their home, credit card, or even gambling debts, then why not student loans? This is an anomaly in bankruptcy law that arbitrarily treats student borrowers worse than other types of borrowers.”
Reforming student loan repayment laws is critical. Even with recent improvements to the federal Income-Based Repayment program, there is still an estimated 730 billion dollars in outstanding federal and private student loan debt in the United States, with only 40 percent being actively repaid. The rest is in default or deferment, resulting in plummeting credit and huge sums of interest for borrowers.
Private student loans have not been dischargeable in bankruptcy court since 2005, leading to a recent hike in student loan debt, which today averages nearly 25 thousand dollars. USSA will be advocating for this and other measures to make college more accessible and affordable for all.