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Senator Introduces Bill to Allow Private Student Loans to be Discharged in Bankruptcy

April 3, 2012 | Adam S. Minsky, Esq. Policy & Reform Private Student Loans

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There’s some more good news coming out of Congress (if you can believe that). A few weeks ago, Congressman Hansen Clarke introduced the Student Loan Forgiveness Act of 2012 which, if passed, would help millions of student loan borrowers better manage their federal and private student loans. Now, Senator Richard Durbin (D-IL) has introduced a bill to reform the bankruptcy laws for student loan borrowers.

First, some background. Until fairly recently, student loans were very much like other forms of consumer debt (such as credit card debt, auto loans, medical bills, etc) in that they could be discharged through the bankruptcy process. Then, in 2005, Congress and President Bush passed a law that completely changed how bankruptcy laws are applied to student loans. This law made it exceedingly difficult to discharge student debt through bankruptcy, outside of exceptional circumstances. The practical impact of this legal change is that if you can’t pay them off, your student loans (particularly private student loans) may haunt you forever. The 2005 law arguably made student loans (which are supposed to be “good” debt, an “investment” in your future) the worst type of debt you can have.

Senator Durbin’s bill, if passed, could change that. It would restore bankruptcy protections for private student loans (although federal student loans would remain without bankruptcy protections). This would allow borrowers to use the bankruptcy process to discharge private student loans. Of course, like any other legislation right now, it’s anyone’s guess whether such a law could pass in our hyper-political gridlocked Congress.

To read more about the bill, click here.

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Policy & Reform Private Student Loans

About Adam S. Minsky, Esq.

Adam S. Minsky founded the first law office in Massachusetts devoted entirely to assisting student loan borrowers, and he is one of the only attorneys in the country practicing in this area of law. He provides counsel, legal assistance, and direct advocacy for borrowers on a variety of student loan-related matters. He regularly speaks to students, graduates, and advocates about the latest developments in higher education financing.

Books by Adam S. Minsky

The Student Loan Handbook for Law Students and Attorneys

The Student Loan Handbook for Law Students and Attorneys

Student Loan Debt 101

Student Loan Debt 101: The Definitive Guide to Understanding and Managing Your Student Loans

Student Loans for Parents and Cosigners

The Student Loan Guide for Parents and Cosigners

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Boston, MA 02110

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