Fresh Start Through Bankruptcy Act Brings Potential for Historical Student Debt Relief through Bankruptcy
One of the biggest topics for discussion throughout many COVID-19 pandemic relief conversations, 2020 presidential campaigns, and almost anyone who is or knows a college graduate involves student loan debt relief. Many progressives have been pushing the current administration to cancel student debt relief entirely and, while there has been minimal progress in that arena, the prospect of full financial freedom from student loans for the approximately 42.9 million Americans struggling with student loan debt is grimm. Student loan relief even through bankruptcy has been extremely difficult since law changes made by Congress in 1976. We’ll discuss these options more in-depth throughout this month, in addition to the current laws regarding student loan debt and the low likelihood of dischargeability.
Recently though, a bipartisan effort has been underway for the dischargeability and potential for student loan debt relief through bankruptcy – and it’s making some positive progress! The bi-partisan bill was introduced by Senator Richard Durbin (D-IL) and Senator John Cornyn (R-TX) and is called The FRESH START through Bankruptcy Act about aims to allow for making it easier for struggling student loan borrowers to seek a bankruptcy discharge for federal student loans after waiting a ten year period. You can read the one-pager from the Senate on this bill here.
The FRESH START bill has 4 main objectives:
- First and foremost, make federally funded student loan debts eligible for discharge in a bankruptcy proceeding. They’re proposing that these debts only be eligible for discharge after a ten year period, beginning from when the first student loan payment is due.
- For non-federally funded student loans, or private student loans, and for government funded student loans that do not meet the ten-year threshold, the “undue hardship” rules that are currently in place (and make student loan dischargeability extremely difficult) would remain in place and still apply to these types of loans.
- This bill also aims to increase accountability within the college institutions themselves. The bill recommends provisions where the schools would repay the government a portion of the discharged student loans within the bankruptcy proceedings. This would apply to two differents types of schools: 1) college institutions where one-third or more of their students receive federal student loans and 2) institutions that have consistently high rates of their students defaulting on their students loans or low repayment rates from their students – specifically at the time of the attendance of the student/bankruptcy filer in question.
- Finally, their last goal with this bill is to provide an option of hope for Americans and student loan borrowers who are struggling to repay their overwhelming amounts of student loans, by allowing bankruptcy to continue to be an option for debt relief.
Since 2007, the amount of student debt across Americans has nearly tripled. This is an unprecedented amount of student loan debt, especially in the times of COVID-19 pandemic with record numbers of unemployment & assistance programs. We know this topic is a hot-button issue for many clients, potential clients, and family members of those struggling with student loan debt. Join us on our Facebook page– like, follow, and comment on our post to keep the discussion going and learn more!
If you’re an Alabamian struggling with student loan debt, credit card debt, mortgage payments, medical debt, tax debt, etc. and need help finding relief- don’t wait any more! We serve anyone and everyone located in the Tuscaloosa, Jasper, Fayette, Walker, Winston, Marion, Lamar, Bibb, counties – call our office TODAY at 205-349-1280 for a free consultation.