Congressman Introduces Bill to Forgive Student Loan Debts during Bankruptcy

A lawmaker has filed legislation in Congress to allow student loan debt to be treated like other forms of debt that can be discharged in bankruptcy proceedings.

Rep. John K. Delaney, D-Md., introduced the Discharge Student Loans in Bankruptcy Act (H.R. 449).

“Student loan debt is dragging down economic growth, keeping the American Dream out of reach for many and is a monthly strain for millions,” Delaney said in a statement. “While student loan debt is a complex problem that will require many solutions—increased support for grant programs, efforts to increase affordability, improved consumer education—we also need to reform our laws to help those with the absolute greatest need. Right now, there is effectively a huge student loan loophole in bankruptcy law that’s hurting real people."

Student loan debt has been mounting as the cost of college tuition continues to rise. According to a study by the Institute for College Access & Success, 69 percent of graduates from the class of 2013 graduated with student loan debt, owing an average of $28,400. Under current law, student loan debt is treated differently than other forms of debt and cannot be discharged.

"Bankruptcy has long been an option of last resort for individuals facing an irresolvable level of debt; bankruptcy isn’t easy or enjoyable, but it’s a necessary part of our financial system," Delaney added. "It doesn’t make sense for students with heavy debt burdens to be worse than someone with credit card, auto loan debt or mortgage debt. Every member of Congress from every state in the country has constituents who are struggling severely because of student loan debt. At the very least we should have some basic fairness in the law.”

Delaney has backed several bills focused on student loans and financial aid. He is also a cosponsor of the Middle Class CHANCE Act, which increases support provided by Pell Grants. In the previous congressional term, Delaney voted for legislation in the House to prevent student loan rates from rapidly increasing and cosponsored the Truth in Tuition Act, which requires institutions to provide multi-year tuition and fee schedules.

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