Shaheen, Hassan Introduce Legislation to Make Bankruptcy Relief Available to Student Loan Borrowers

May 13, 2019

(Washington, DC) – U.S. Senators Jeanne Shaheen (D-NH) and Maggie Hassan (D-NH) recently joined their colleagues in introducing bicameral legislation that would give hard-working Granite Staters and Americans overwhelmed by debt the option of obtaining meaningful bankruptcy relief that includes student loan debt.  

The Student Borrower Bankruptcy Relief Act of 2019 would eliminate the section of the bankruptcy code that makes private and federal student loans non-dischargeable, allowing these loans to be treated like nearly all other forms of consumer debt. Bankruptcy is a process individuals facing insurmountable debts may pursue to have certain debts forgiven. Currently, individuals who pursue bankruptcy are often left burdensome student loan debt – leaving them with long term damage to their credit history and ongoing challenges with getting out from under their student debt.

 “For far too many Americans, student debt is an inescapable burden,” Senator Shaheen said. “This legislation would allow individuals declaring bankruptcy to get necessary relief from their student debt. I appreciate the bipartisan attention to this effort and urge more Democrats and Republicans to follow suit.”

“Granite Staters and Americans are getting crushed by the heavy burden of student loan debt, and we must ensure that they have options to get the relief that they need,” Senator Hassan said. “By treating student loans like other forms of consumer debt, borrowers who face insurmountable debts and choose to pursue bankruptcy relief would have their student loans discharged. This legislation is a common sense change to help more borrowers get out from under their debt.”?? 

Most forms of debt, such as credit card debt and medical debt, can be discharged through the bankruptcy process. Only a limited number of debts, such as child support payments, alimony, overdue taxes, and criminal fines, are treated as non-dischargeable in bankruptcy. However, current federal law also makes student loan debt non-dischargeable except in extremely rare cases. Non-dischargeable student debt is constraining the career and life choices of student borrowers, and analyses by the Federal Reserve show that the student debt burden is affecting the broader economy. 

The legislation was introduced by Senators Dick Durbin (D-IL) and Elizabeth Warren (D-MA) and bipartisan companion legislation was introduced by Congressman Jerrold Nadler (D-NY-01) and John Katko (R-NY-24) in the House of Representatives.