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Summary

Currently, student loans cannot be discharged when the debtor declares bankruptcy, which means that, unlike most other unsecured debt, student loans will stay with the debtor post-bankruptcy. There are two bills pending before the 110th Congress that would amend the U.S. Bankruptcy Code to restore limited dischargeability for student loans, consistent with the law at various points in its prior history. If enacted, S. 511 would make both public and private loans dischargeable in bankruptcy when seven years have passed from the beginning of the repayment period. Another bill, S. 1561, would eliminate privately financed student loans from those that are nondischargeable in bankruptcy. The purpose of the bill would be to restore the law to its status before the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005. This report examines the history of student loan nondischargeability in bankruptcy law and the bills introduced to amend treatment of loans in bankruptcy.1 Introduction. Currently, student loans cannot be discharged when a debtor files for bankruptcy under the U.S. Bankruptcy Code, 11 U.S.C. � 101 et seq., which means that, unlike most other unsecured debt, student loans will stay with the debtor post-bankruptcy.2 Prior to 1976, educational debt was completely dischargeable, but with the enactment of the code in 1978, governmental student loans were made conditionally dischargeable. Over the years, the scope of student loan dischargeability has been steadily narrowed. Despite the trend toward nondischargeability, some have questioned whether a policy of full nondischargeability is necessary or appropriate. Two bills have been introduced which would allow limited dischargeability for specified student loans. This report surveys the history of student loan nondischargeability and pending bills to amend the U.S. Bankruptcy Code.

Related Legislation:
• S.511
• S.1561

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