Reps. Nadler and Cicilline introduced a bill to give student-loan borrowers relief through bankruptcy.
It would treat student loans like other forms of consumer debt, like credit card and medical.
Currently, very strict standards make student debt difficult to be discharged in court.
Giving student-loan borrowers relief through bankruptcy is long overdue, two Democratic lawmakers say.
On Thursday, House Judiciary Chair Jerrold Nadler and Rhode Island Rep. David Cicilline introduced The Student Borrower Bankruptcy Relief Act of 2022, which would eliminate the section of the US bankruptcy code that makes private and federal student loans nondischargeable through bankruptcy and treat those loans like all other forms of consumer debt, like credit card and medical debt.
To date, getting rid of student debt in court is especially difficult. Borrowers must meet the undue hardship standard, which requires a borrower to prove 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. The Democrats' bill would change that.
"Far too many people across the country have been forced to take on massive and often insurmountable debt to pay for education," Cicilline said in a statement. "The system is clearly broken and needs massive reform. A college education cannot be a privilege just for the wealthiest few, but rather must be accessible to every student who wants to further their studies and pursue the career path of their choosing."
As the press release noted, student loans were mostly dischargeable before the undue hardship standard was created in 1998. President Joe Biden helped make the standards stricter in 2005 when he, as a senator, supported the Bankruptcy Abuse Prevention and Consumer Protection Act, which expanded the strict standards to borrowers with private student loans.
Since then, very few borrowers have succeeded in getting rid of their debt in court. During the pandemic, the Biden administration opposed borrowers' attempts to do just that — even after committing to reform the process. James Kvaal, under secretary of education, said in June that "we want to review that policy, and that is something that is underway now. There's an interagency process for that, it's not solely within the department's discretion, and we're working quite hard on that, actually."
But the legislative route could prove to be quicker. Along with Nadler and Cicilline's bill, Massachusetts Sen. Elizabeth Warren also reintroduced a broader consumer bankruptcy bill earlier this week that would create a simplified route to access relief in court for student-loan borrowers, along with Americans with other forms of debt. And Senate Majority Whip Dick Durbin and Sen. John Cornyn of Texas put the FRESH START Through Bankruptcy Act of 2021 on the table, which would allow borrowers to seek a bankruptcy discharge of their federal student loans after 10 years.
"Americans across the nation are facing crushing student loan debt that is preventing them from purchasing homes and living the true American dream," Nadler said in a statement. "We must ensure that Americans are able to invest in their education and then go on to live quality lives without the cloud of rising debt hanging over their heads."
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