Tag: student loan debt bankruptcy

Bankruptcy Law, student loan debt, Student Loans

Democrat Lawmakers Push for Student Loan Debt Bankruptcy Reform

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Discharging student loan debt through a consumer bankruptcy case has been next to impossible for borrowers facing a financial crisis. Bankruptcy reform advocates have been calling upon lawmakers to make this process easier for student loan borrowers with no success. Recently, several prominent Democrat lawmakers have called upon the president to help make these reforms through executive action. In addition, they have also sent separate requests to two federal agencies to do the same.

In order to receive a discharge for their federal student loan debt, borrowers facing a bankruptcy proceeding have been required to file a separate legal action within their already open bankruptcy case and to prove that they would suffer an “undue hardship” if forced to continue paying on their student loan debt.

student loan debt, Student Loans

Student Debt Cancellation Bill Scheduled to be Signed into Law this Week

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Congress has passed a $1.9 trillion stimulus package that includes important provisions concerning student loan cancellation, as well as increased federal regulations on for-profit colleges.   

Several different objectives were met by Congressional leaders through the passing of this legislation. One of the biggest goals was to address the tax burden that student loan borrowers face when receiving any portion of their student loan debt forgiven. Up until now, whenever a borrower received forgiveness for any portion of his or her student loan debt, the amount that was forgiven was considered taxable income. Under this legislation, tax forgiveness will be treated as tax free for the next several years.  

Debt Relief, student loan debt, Student Loans

White House Considering Executive Action to Cancel Portion of Nation’s Federal Student Loan Debt

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The Biden administration is considering issuing an executive order that would effectively cancel some portion of the $1.6 trillion in federal student loan debt held by 43 million Americans. This statement comes as no surprise as student loan forgiveness and student loan reform were consistently topics of discussion during the 2020 Presidential campaign.  

The statement came last Thursday from White House press secretary Jen Psaki. She indicated the administration was looking into whether President Biden had the executive authority to cancel a portion of the nation’s outstanding student loan debt. However, they also indicated that they would welcome any legislation brought forth by Congress to do the same.  

student loan debt

Student Loan Bankruptcy: A Solution to the Student Loan Debt Crisis

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With an estimated $1.6 trillion owed in student loan debt nationwide, it comes as no surprise that solving the student loan crisis has been at the forefront of most political campaigns in 2020. However, many argue that the solution to the problem is much simpler than just forgiving student loan debt. In fact, the answer to solving the student loan crisis could lie in the United States Bankruptcy Code.  

Traditionally, student loans have been all but impossible to discharge in either a Chapter 7 or Chapter 13 bankruptcy case. Since the creation of the Higher Education Act in 1965, Congress has continued to add rules that make discharging federal student loan debt more and more difficult in bankruptcy. In 2005, private student loans were added to the list of debts that were difficult to discharge in bankruptcy, regardless of how much the filer was struggling financially. 

student loan debt, Student Loans

Facing a Broken Student Loan System Borrowers Set Hopes on New Reform Bill

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The student loan system has been considered broken for quite some time, and while many reform efforts have been made to help improve the process, nothing has been successful thus far. However, a new student loan reform bill could signal meaningful change is on the way.

This reform bill focuses on how student loan debt is handled in bankruptcy. Traditionally, student loans are non-dischargeable in a personal bankruptcy case, unless a specific set of criteria are met. The “Consumer Bankruptcy Reform Act of 2020,” proposed by House Judiciary Committee Chairman Jerry Nadler (D-NY) and Senator Elizabeth Warren (D-MA) proposes a way to make this process easier, allowing more student loans to be discharged through personal bankruptcy. The bill addresses both Chapter 7 and Chapter 13 bankruptcy cases and proposes changing the current systems under each chapter by one system, entitled Chapter 10.  

student loan debt, Student Loans

Baby Boomers and Higher-Income Earners Carry Largest Amount of Student Loan Debt

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Student loan debt affects more than 44 million Americans, a collective $1.67 trillion in outstanding student loans.  Members of the Baby Boomer generation owe the largest portion of student loan debt, as well as borrowers who earn higher incomes. 

According to a recent study by Fidelity, that surveyed 250,000 outstanding student loans, Baby Boomers owed 33 percent (33%) more debt in 2020 than they did in 2019. The biggest reason for this increase has to do with the number of Baby Boomers who took out Parent Plus loans to help their children and grandchildren attend college.  

student loan debt, Student Loans

Bankruptcy Court Discharges $200,000 in Private Student Loan Debt for Colorado Couple

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A major victory was scored for student loan borrowers after a U.S. Court of Appeals for the Tenth Circuit issued a ruling stating that a Colorado couple’s private student loan debt could be discharged in their personal bankruptcy case. The ruling allowed $200,000 of private student loan debt to be wiped out, breaking the long-standing stigma that student loan debt, particularly private student loan debt, is near impossible to discharge in a bankruptcy case.

The Colorado couple had taken out $200,000 in private student loans from Navient, one of the nation’s largest student loan issuers. The ruling comes after a similar bankruptcy case, where the borrower also had their student loan debt discharged. In that case, the loan servicer appealed the ruling.

Coronavirus, COVID-19, Debt Relief, student loan debt

New Legislation Provides Student Loan Forgiveness to Frontline Healthcare Workers

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Healthcare workers on the frontlines are putting their lives at risk every day during the coronavirus (COVID-19) pandemic, which has many asking what can be done to financially help these dedicated individuals.

Rep. Carolyn Maloney (D-NY) plans to introduce new legislation that will do just that by forgiving outstanding student loan debt carried by these frontline healthcare workers. The legislation is titled The Student Debt Forgiveness for Frontline Health Care Workers Act. The hope behind this new legislation is that by forgiving student loan debt for these workers, a large financial burden will be lifted. Additionally, this incentive could possibly drive others to join the healthcare industry and continue the fight against COVID-19.

student loan debt

Court Ruling in Favor of Discharging Student Loan Debt Gives Borrowers Hope

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Student loan forgiveness form on a desk.

When it comes to discharging debts in a bankruptcy case, student loan debt has traditionally been one of the most difficult debts to discharge. But a New York court ruling issued on January 7, 2020, has given student loan borrowers hope that change is near.

A New York judge ruled last week that the $221,385.49 in student loan debt that U.S. Navy veteran Kevin Rosenberg owed for six years was considered a dischargeable debt in his Chapter 7 bankruptcy case.

student loan debt, Student Loans

The Presidential Candidates Campaign Proposals for Student Loan Debt

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One of the major issues at the center of the 2020 Presidential Election is student loan debt, an issue that affects 44 million American borrowers. Each of the Democratic presidential candidates have his or her own proposal on how to handle this massive issue that seems to be growing every year. Some of these plans would reduce the outstanding balances borrowers hold while others call for a complete elimination of the debt.

It is said that student loan balances have surpassed credit card debt and auto debt. The average undergraduate college graduate leaves school with at least $30,000 in student loan debt, which is triple what graduates had in the 1990s. Every day, 3,000 borrowers go into default on their student loans, which is why all the candidates are calling for some level of reform.