Representative John Katko with Elise Stefanik and Richard Hanna visiting Fort Drum, New York.
In an effort to help those who are dealing with financial hardship—including those struggling with student loan debt--a bipartisan bill was introduced that would allow student loan debt to be dismissed in bankruptcy.
U.S. Representative John Katko is the lead Republican cosponsor of the Discharge Student Loans in Bankruptcy Act while its sponsor Representative John Delaney, a Democrat, initially introduced the bill in 2015. Renewing these efforts, Representatives Katko and Delaney reintroduced the bill in early May, dubbing it a bipartisan effort.
Currently, federal law doesn’t allow student loan debt to be discharged in bankruptcy, although other forms of outstanding debt such as credit cards have the potential for discharge. This bill aims to ensure that student borrowers who file for bankruptcy wouldn’t be required to pay back their outstanding student loan debt and that lenders couldn’t send it to debt collectors.
Lawmakers are concerned about the amount of student loan debt that Americans are accruing which breached $1.4 trillion recently. That alarming figure is only expected to rise in the future. The burden of that debt affects the economy in many different ways, and it often blocks borrowers from moving forward financially. Many student debtors are forced to put off certain important milestones such as starting a family, purchasing a new house, or even buying a new car.
And while filing for relief should be a last resort, they believe that carrying the burden of student loan debt even after declaring bankruptcy is unfair—especially since other debts are cleared. This is actually one of many efforts undertaken by Capitol Hill politicians, both Senators and House Representatives, to improve the financial position of student borrowers.
One of the most popular efforts stems from Democratic Senator Elizabeth Warren who represents Massachusetts. She has introduced her Bank on Students Emergency Loan Refinancing Act numerous times, but thus far, she has been met with failure. If successful This policy is so popular that other state legislatures have attempted to implement their own refinancing policies; the legislatures in Minnesota and Virginia are two recent examples of these efforts.
Reformative efforts do not focus solely on federal student either. In fact, some congressional actions attempt to establish protections against social security garnishment among older student debtors. Other politicians have attempted to expand loan forgiveness stipulations and protections for borrowers who attended closed down for-profit colleges. At any rate, the student loan issue has not been ignored at all, but progress is still slow, leaving many on Capitol Hill and borrowers alike frustrated with student loan payments.
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