Chapter 6 Future Outlook

• Jurisdiction: United States

Chapter 6 Future Outlook

Student loan debt is a major legal, political and social concern, and articles, op-eds and websites dealing with student loans can be found daily in the media and online. As might be expected, political figures and commentators have weighed in with their own perspectives and solutions.

A. Recent Legislative Initiatives

Each year, bills are introduced in Congress that seek to amend the Bankruptcy Code to make student loan debt dischargeable in bankruptcy. For example, in 2015, Sen. Dick Durbin (D-Ill.) and 12 co-sponsors introduced the Fairness for Struggling Students Act of 2015 (S. 729), which would remove federal and private student loans from the discharge exception, thereby making both dischargeable as nonpriority unsecured debt. The bill was a repeat of previous efforts to make education loans dischargeable. Over in the House, Rep. John Delaney (D-Md.) introduced the Discharge Student Loans in Bankruptcy Act of 2015 (H.R. 449), which would make all student loan debt dischargeable as nonpriority unsecured debt. As with similar efforts in prior years, none of the bills were reported out of committee.

Not all legislative efforts are aimed at discharging student loans in bankruptcy. In 2012, Rep. Hansen Clark (D-Mich.) introduced the Student Loan Forgiveness Act of 2012 (H.R. 4170), which, among other provisions, would have shortened the loan forgiveness period on certain federal loans to 10 years and, significantly, allowed certain borrowers to consolidate private loans into federal Direct Consolidation Loans. Sen. Tom Harkin (D-Iowa) co-sponsored the Know Before You Owe Act of 2012 (S. 2280), which would have required institutions of higher education to provide student borrowers with enhanced disclosures about the availability of federal loans and the differences between private loans and other forms of financial aid. In addition, the act would have required private lenders to verify the borrower's enrollment and eligibility with the school before making a loan, provide the borrower with quarterly updates detailing accrued, unpaid and capitalized interest, and report to the Consumer Financial Protection Bureau on all education loans they issue. Both bills died in committee.

A new trend in student loan debt-relief proposals is to offer tax credits to employers for amounts they pay on employee student loans. The Student Tax Affordability and Relief Act (H.R. 4363), introduced by Rep. Austin Scott (R-Ga.), would provide an...