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When lawmakers reconsider whether they can be released at a loss, the debate over student loan reform continues.
The Senate Judiciary Committee met on August 3 to discuss how student loans should be handled during the bankruptcy process. Student loans cannot be repaid at a loss unless they have an unnecessary problem – this term has no specific meaning and is determined by the courts.
Most creditors failed to file for bankruptcy. But a new bipartisan account is to change that and completely reform the student loan system.
The new bill will allow student loans to be released at a loss after a 10-year waiting period
During the hearing, Senators Dick Durbin (D-Il) and John Corney (R-Tics) briefly introduced a new bill that would fix student loan disbursement in bankruptcy laws.
The new introduction to bankruptcy law allows student loan borrowers to repay federal student loans after a 10-year waiting period. More than a third of colleges that receive federal student loans are required to repay part of their loans to the government.
Durbin, who has previously introduced and co-sponsored student loan improvement accounts, said this would be the first bilateral effort to fix the bankruptcy rules.
In terms of bankruptcy, student loan repayment laws have been amended over the past 20 years and more. The waiting period for student loans to go bankrupt had previously been five to seven years. But In 1998, Congress rewrote the Higher Education Act, eliminating the waiting period for student loans. Durban described this week’s hearing as “impossible.”
“We made a mistake in 1998,” Durbin said. “Debt settlement should not be the only problem in resolving student loans. After a significant period of protection, we need to return to where we were before 1998, so that borrowers can be relieved. That system worked. ”
According to lawmakers and witnesses, the 10-year waiting period will never be fully repaid, reducing the “moral risk” of borrowers’ excessive student debt.
According to a witness, Dr. Bethers, a senior staff member at the American Enterprise Institute of the Right Basil Management Institute in Washington, DC, said the insolvency payment system would create “effective wallpaper” but would be risky. .
According to Akers, allowing private loans to be released can make it harder for creditors to repay students if they are worried about their ability to repay loans because the eligibility of private loans depends on the borrower’s credit history. However, if lenders are concerned about the chances of a loan being released in the event of a bankruptcy, it may encourage them to take out less-than-impossible loans.
Hearing Participants Agree Student Loan Improvement Needed
The court heard that higher education costs have risen faster than inflation, including the general state of the federal student loan system, and that borrowers have to pay more than they owe.
Senator Chuck Grassley (RIA) said: “To address these challenges, we need to look at the entire higher education ecosystem: Recommendations to change the bankruptcy code will only address the biggest problem. “If we don’t fix the root causes, we will close the barn door after the horse is out.”
Forty-five million borrowers owe $ 1.57 trillion in student loans, according to a recent report by the Federal Reserve Bank of New York. For many Americans, delays in living standards, such as home ownership or childbearing, are a major financial burden.
Debtors who were defrauded by non-profit colleges were also at the heart of the case.
Witness Diane Bartta, network manager in Richmond Hills, Georgia, owes more than $ 120,000 in student loans. Bertha accumulated most of the debt during the online master’s degree program at Ashford University’s for-profit online school.
Bertha, who made a loss for Chapter 13, said she could not include her student loan in the process.
“If I could get rid of the debt at a loss – like nausea – it would be a huge relief,” Bartta said. There are still sleepless nights to worry about how I will pay and if I can’t, I will worry about my children, my wife and me.
Some victims of for-profit colleges have been pardoned by the Department of Education, such as the ITT Technical Institute. But that relief came only after years of trial. Opening the door for student loans to go bankrupt can speed up the process and bring relief to borrowers soon.
Is Student Loan Improvement on the Washington Back burner?
The goal of student loan reform is political fresh potatoes. The legislature and the president are all pushing for some kind of reform of the student loan system.
A.D. In 2005, President Joe Biden backed a change that made it difficult to get rid of student loans. Now he takes a very different position. It has previously supported student loan disbursement through bankruptcy plans and is currently being pressured by some lawmakers to extend the federal student loan tolerance period, which ends Sept. 30.
Read more: Will Biden extend federal student loan tolerance?
For some Democrats, there is an unlimited mandate for a borrower to cancel a student loan of up to $ 50,000. Council Speaker Nancy Pelosi (DAA) recently said Biden has no authority to cancel student loans: only Congress.
For now, experts are embracing the approach of increasing student loan debt to debt consolidation. Leslie Tyne, a debt relief lawyer in New York, said the new law could benefit consumers – but it could have a long way to go before it becomes a law.
“Bankruptcy laws often do not improve; The last major amendment to the Consumer Banking Act was the 2005 Bankruptcy Prevention and Consumer Protection Act.
And when the bill passed in 2005, a congressional debate on bankruptcy reform began. It was started around 1998. Tyne also points to the 2020 Consumer Bankruptcy Amendment Law, which was introduced to make losses more expensive and more complicated for prices – two decades of accounting, performance, and reform.
“It could take years for Congress to approve and implement changes to the law,” says Tyne.