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January 22, 2015 at 08:03 AM
Hoping to address the burgeoning student loan debt crisis, Rep. John Delaney, D-Md., introduced legislation Thursday to allow student debt to be discharged in bankruptcy.
Delaney’s bill, the Discharge Student Loans in Bankruptcy Act, H.R. 449, addresses what Delaney sees as a “huge student loan loophole in bankruptcy law that’s hurting real people.”
The bankruptcy law, he said in a statement, needs to be reformed “to help those with the absolute greatest need,” noting that student debt is currently the only type of debt that’s not dischargeable in bankruptcy.
Student loan debt, Delaney argued, “is dragging down economic growth, keeping the American Dream out of reach for many and is a monthly strain for millions.” He noted that addressing such debt “is a complex problem that will require many solutions,” but that “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.”
Delaney cites research by The Institute for College Access & Success finding that 69% of college graduates from the class of 2013 graduated with student loan debt, owing an average of $28,400.
Lawmakers from “every state in the country have constituents who are struggling severely because of student loan debt,” he continued. “At the very least we should have some basic fairness in the law.”
President Barack Obama noted Tuesday in his State of the Union speech that one of his goals is to help students reduce their college debt load by making community college free. “I want to spread that idea all across America, so that two years of college becomes as free and universal in America as high school is today,” Obama said, adding that he also wants to work with the new Congress “to make sure those already burdened with student loans can reduce their monthly payments.”
Obama has offered two such ways to lower students’ debt load — eliminating the tax on student loan debt forgiveness under Pay-As-You-Earn (PAYE) and other income-based repayment programs, and replacing the complicated student loan interest deduction for new borrowers with “more generous and more targeted tax relief” through other programs.
