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Discharging student loans in bankruptcies remain elusive

On Behalf of | Oct 26, 2023 | Bankruptcy |

The federal student loan forgiveness program entered the spotlight to provide relief for millions. Qualifying borrowers could qualify for up to $10,000 in grants. Those with Pell grants would be eligible for an additional $10,000. Yet, not one dollar was disbursed due to legal challenges.

Bankruptcy rights exist in the Constitution unless you have student loans. Millions upon millions suffer the burden of significant death. When looking back at the entire history, this is not the first time this has occurred.

Trillions in debt

While the most likely demographic to carry significant student loan debt is those under 30 years old, close to 25 percent are 50 and older. Currently, US citizens in the millions are dealing with student loan debt, reaching levels once unforeseen. The end of 2022 saw 1.6 trillion dollars based on Federal Reserve Bank of New York data. For multiple decades, loans have grown while education costs have skyrocketed well beyond tuition rates.

During the academic year of 1968 to 1969, when adjusted for inflation, tuition, fees, and room and board costs for a public, four-year education was close to $1,600 based on data from the National Center for Education Statistics. Fast forward to 2020, the costs were $29,033. With inflation, the amount should actually come in at $12,000.

Persistent inaction

Attempts to qualify student loan debt for bankruptcy discharges have fallen short. Bills in 2006, 2010, and 2015 failed to pass. Most recently, The Discharge Student Loans in Bankruptcy Act of 2019 could have created a path, yet it still needs to make it out of a House subcommittee on regulatory reform. A second attempt (HR 138, the Private Student Loan Bankruptcy Fairness Act) also stalled.

For students shouldering significant debt, an end in sight remains elusive.