If you’re one of the millions of Americans with student loan debt, you’ve likely been keeping some eye on the machinations of power players in Washington, D.C. There’s been a lot of talk by the Biden Administration and some members of Congress about how to take some of the burden off people whose debt has been weighing them down financially and preventing them from fulfilling the dreams they had back in college or grad school as they were accumulating that debt.
That loan cancellation (or forgiveness, as it’s sometimes called) could come in the form of an executive order signed by President Biden or through a law passed by Congress (if enough representatives can agree on it – and on a figure). Amounts from $10,000 to $50,000 per borrower have been discussed.
There’s been some relief over the past two years. People have been allowed to pause their loan payments because of the uncertain financial climate that we’ve all faced. However, the U.S. Department of Education is expected to end that pause in February. The department is considering giving borrowers an added three-month grace period.
The proposed legislation would change the law around student loans and bankruptcy
Another issue for those with student loan debt that Congress has taken on is the inability for most people to discharge their student loans by filing for bankruptcy. Proposed legislation called The FRESH START Through Bankruptcy Act of 2021 has been introduced by the bi-partisan team of Democratic Sen. Dick Durbin and Republican Sen. John Cornyn.
The legislation would allow borrowers to discharge federal student loans in bankruptcy after ten years from the due date of their first payment. It would still allow the hardship option that currently exists and doesn’t have a ten-year waiting period.
Student loan debt can affect every part of your financial health. Even if you’re not able to discharge it right now, it may still be worth exploring whether bankruptcy could help you better deal with that and other financial obligations.