Sens. Dick Durbin and John Cornyn have announced a new bill that would make student loan discharge easier to obtain in bankruptcy. Here’s what to know about the bipartisan bill.
1 current trend within student loans for the week of Aug. 16, 2021
1. New bill seeks to make student loan bankruptcy discharges easier to obtain
Senate Majority Whip Dick Durbin and Republican Senator John Cornyn have proposed a bill calling for student loan bankruptcy discharge reform. The bipartisan bill, called the “FRESH START Through Bankruptcy Act of 2021,” would allow federal borrowers to discharge their loans in bankruptcy after 10 years from the start of payments.
If passed, the bill would:
- Make federal student loans eligible for discharge in bankruptcy 10 years after the first payment is due.
- Keep the existing undue hardship option for student loans that have been due for less than 10 years.
- Increase accountability with colleges and universities with high loan defaults and low repayment rates.
How this affects student loans
Right now, getting your federal student loans discharged in bankruptcy is possible, but it is a difficult process. In order to get student loans discharged, borrowers must demonstrate “undue hardship” – a circumstance that is exceedingly rare. Should this new bill pass, more borrowers would have the opportunity to get relief through bankruptcy.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.