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Introduction of Student Loan Bankruptcy Act of 2018

Floor Speech

Date: July 26, 2018
Location: Washington, DC
Issues: Finance and Banking Higher Education

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Mr. CORREA. Mr. Speaker, student loan debt has risen dramatically over the past decades. Today, many borrowers find themselves unable to repay their student loans. In the past, Congress has determined that allowing borrowers to easily discharge student loans under bankruptcy could threaten the student loan program and therefore have made student loans non-dischargeable. This decision has limited the circumstances in which a borrower may discharge their student loan debt. That is why I am introducing the ``Student Loan Bankruptcy Act,'' a bill to provide both private and federal student loan borrowers an opportunity to obtain relief from insurmountable debt.

Currently, student loans are among the types of debt that require debtors to provide proof of an ``undue hardship.'' The interpretation of undue hardship has varied drastically in the courts throughout the United States. My bill would allow a borrower with student loan debt to file for bankruptcy after five years in the same way they would with any other type of debt. Of course, just because one files for bankruptcy, does not mean one will be granted it and their debt will be discharged. However, the opportunity to file for bankruptcy can provide relief for debtors who are truly struggling and can no longer afford to pay off their debt.

During the 1980s, debtors had a temporal discharge option. It used to be law that debtors had two options for discharging student loans: the borrower would (1) demonstrate an undue hardship or (2) prove that the loan first became due at least five years before the debtor filed for bankruptcy. This in turn made student loan debt dischargeable as all other types of ways to file for bankruptcy, after five years.

Mr. Speaker, one should never fear to pursue an education because of the cost. Borrowers with growing student loan debt should have the opportunity to file for bankruptcy without the need to jump through bureaucratic hoops.

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