Legislation for Bankrutpcy Discharge of Private Student Loans Goes To Next Step

H.R. 2028, which would make private student loans dischargeable in bankruptcy, has taken the next step in the Congressional legislative process. The bill was introduced by Congressman Steve Cohen (Democrat from Tennessee) on May 26, 2011 and it has 17 co-sponsors including Jarid Polis (Democrat from Colorado). The bill has now been referred to the House Committee on the Judiciary (the next step).

Combined student loan debt will likely exceed $1 Trillion dollars this year; by comparison, there is less than $830 million in credit card debt outstanding. The problem is that there are no reasonable options for dealing with private student loans; the debtor, if unable to pay, is stuck. Student loans are more difficult to resolve than tax debt; at least with the IRS you can negotiate payment plans based on your actual ability to pay, settle those taxes, or discharge those taxes in bankruptcy under certain circumstances. But no such options exist for private student loans; the unfortunate debtor is left to the whim of the bank. Being stuck in student loan debt means the borrower cannot be productive, consuming members of society.

Although this move is a positive step, bankruptcy bills tend to wither in committee. Here is a link to the list of members of the House Judiciary Committee, http://judiciary.house.gov/about/members.html. If any of your Congressman are members, I strongly encourage you to write your Congressman to support the bill and have them bring it to the House of Representative’s floor for vote.

H.R. 2028: Private Student Loan Bankruptcy Fairness Act of 2011 GovTrack.us.