Lawmakers push for clearer student loan forgiveness rules

Seven lawmakers urged a top Obama administration official to provide clearer rules for wiping out student loan debt when it may cause financial hardship to borrowers in bankruptcy.

The group of Democratic lawmakers on Friday urged Education Secretary Arne DuncanArne Starkey DuncanHow Democrats learned to stop worrying and love teachers Obama Education Secretary: US education system is 'top 10 in nothing' Obama Cabinet official: Trump doesn’t want educated workforce MORE to establish specific standards for determining whether repayment of a student loan is an “undue hardship” and eligible for forgiveness.  

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“Because federal law treats student debt as non-dischargeable in bankruptcy proceedings, borrowers can be burdened with this debt for a lifetime even if circumstances make it unlikely that the borrower will ever be able to repay,” they wrote.

They argued that the guidance would help the most vulnerable loan holders by bringing consistency to the department’s handling of undue hardship claims.

In turn, that would allow the Education Department to better focus its loan collection efforts on cases where there is a more realistic opportunity for recovery, they said.

Federal law allows some borrowers to have their loans forgiven even though courts have established a high standard of proof for eligibility.

“While we recognize the department’s prerogative to fairly collect on student loan debts owed to it, we do not find it sensible or cost-effective for the department or its contractors to engage in lengthy legal challenges and appeals against bankrupt student loan borrowers who have demonstrated a clear and legitimate inability to repay their loans,” they wrote.

Some of the lawmakers — Sens. Dick DurbinRichard (Dick) Joseph DurbinThe Hill's Morning Report - Trump and House Democrats resume battle The Hill's Morning Report - Trump and House Democrats resume battle Trump's border funding comes back from the dead MORE (D-Ill.), Jack ReedJohn (Jack) Francis ReedTop voting machine manufacturer urges Congress to make paper records required Top voting machine manufacturer urges Congress to make paper records required Democrats ask Fed to probe Trump's Deutsche Bank ties MORE (D-R.I.) and Elizabeth WarrenElizabeth Ann WarrenFive takeaways from first Democratic debate lineup Five takeaways from first Democratic debate lineup Black Economic Alliance official says African-American voters will 'determine who sits in the White House' MORE (D-Mass.) and Reps. John ConyersJohn James ConyersHouse to hold first hearing on slavery reparations in over a decade House to hold first hearing on slavery reparations in over a decade Reparations: The 'lost cause' of black politics? MORE (D-Mich.), Elijah CummingsElijah Eugene CummingsHouse Democrats question DHS over using facial recognition tech on US citizens House Democrats question DHS over using facial recognition tech on US citizens Democrats lash out at Trump's bombshell remarks MORE (D-Md.), Steve CohenStephen (Steve) Ira CohenJon Stewart excoriates lawmakers for skipping hearing on 9/11 victim fund Jon Stewart excoriates lawmakers for skipping hearing on 9/11 victim fund Democrats begin Mueller hearings with Watergate-era witness MORE (D-Tenn.) and Hank JohnsonHenry (Hank) C. JohnsonDemocrats lash out at Trump's bombshell remarks Democrats lash out at Trump's bombshell remarks Pelosi, Nadler tangle on impeachment, contempt vote MORE (D-Ga.) — have introduced a bill that would restore the bankruptcy law to language in place before 2005 so that privately issued student loans will once again be dischargeable in bankruptcy like most other forms of private debt.

“Americans have accumulated $1.2 trillion in student loan debt, exceeding even the level of credit card debt in our nation," they wrote.

They specifically asked Duncan to issue guidance with respect to the collection of a federal student loan owed by a borrower who has filed for relief under Chapter 7, 12, or 13 of the federal bankruptcy code and who has requested that the bankruptcy court determine that the loan be discharged under the “undue hardship.”

“The need for action with respect to the student loan debt crisis is urgent,” they wrote.  

“The suggested guidance would benefit the most vulnerable student loan debtors in our population as well as the overall economy."