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This is the first time it’s been the bipartisan consensus of choosing between student loan forgiveness and bankruptcy reform.
Last week a new bill called “FRESH START Through Bankruptcy Act of 2021” was proposed by Senate Majority Whip Dick Durbin (D-IL), and Senator John Cornyn (R-TX)
This bill enables borrowers to opt for student loan discharge in bankruptcy. With this bill student, borrowers get a chance to get back on their feet.
If the bill gets approved, then it allows federal student loans to become eligible for discharge in bankruptcy proceedings 10 years after the borrower’s first loan payment comes due.
The associate professor of law at the University of Utah and an expert on student loan bankruptcy law, Jason Iuliano, said that the bill’s 10-year waiting time was noteworthy.
He supports this idea because he feels the people who have been struggling to repay their student loans for a decade can benefit from bankruptcy’s fresh start and get some respite in their life.
And it would see to it that the student loan credit market continues to be operational.
If student loans are discharged in bankruptcy or if the colleges or universities had high default rates and small repayment rates continuously then the bill proposes to make colleges that receive federal loans from more than a third of their students to be accountable for partial reimbursement to the Department of Education (ED).
Iuliano said that this proposal will stop underperforming schools that have ever-increasing tuition fees, to cut it or improve employment prospects for their students.
Close to 45 million Americans have more than $1.7 trillion debt in federally-backed student loans.
Student loan bankruptcy discharge
Though it is difficult, discharging student loans through bankruptcy, is not impossible.
The student loans were just like other unsecured debt bankruptcy before 1976. Congress observed that student borrowers were declaring bankruptcy right after graduation. That is when laws became harder.
Sen. Josh Hawley (R-MO) feels that the bipartisan bill was a very sensible approach because of students with huge debts as lifelong serfs of banks and lifelong serfs of universities by not letting them discharge a bankruptcy of their debt under appropriate circumstances.
Reference Source: Yahoo Finance
