CAN A STUDENT LOAN BE DISCHARGED IN BANKRUPTCY?

 

It is that time of year again.  Colleges are mailing tuition bills to students and students are wondering how they are going to come up with the money to pay the tuition.  Many students will rely on government federal loans to pay all or part of their tuition.  Others will rely on private loans from for-profit institutions.   Unfortunately, many students later find themselves unemployed and struggling to repay their student loans.

Under the current bankruptcy rules, student loans, government or private, are not dischargeable in bankruptcy unless the borrower can demonstrate that payment of the debt will impose an undue hardship on him and his dependents.  Before the Bankruptcy Code was changed in 2005, however, private student loans were treated like other private debt and were dischargeable in bankruptcy.

On May 26, 2011, United States Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Al Franken (D-MN) introduced the Fairness for Struggling Students Act of 2011.  United States Representatives Steve Cohen (D-TN), Danny David (D-IL), George Miller (D-CA) and John Conyers (D-MI) introduced the Private Student Loan Bankruptcy Fairness Act of 2011.  The pending legislation would allow private student loans to be discharged in bankruptcy the same as any other private debt.  The bills are currently in committee in the Senate and House.

 

 

 

 

 

 

 

 

 

 

 

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