Elderly student loan borrowers owe $121 billion. They ask Biden for relief.

[MichMan]

10. The bankruptcy law was first passed in 1976 and updated a few times afterwards

Although not impossible, discharging student loans in bankruptcy is difficult. Due to a 1976 law, student loans are not treated during bankruptcy proceedings like other forms of debt, such as credit card debt or auto loans. This policy stems from a federal commission on bankruptcy laws, which heard testimony that claimed the easy discharge of educational loans in bankruptcy could undermine federal student loan programs. Congress was concerned that students might borrow thousands of dollars from the federal government, graduate, declare bankruptcy to have their student loans discharged and never repay their educational debt.

In an extension of the Higher Education Act of 1965, Congress passed the 1976 law, which made borrowers wait five years after the first student loan payment was due before they could have the loan discharged through bankruptcy. Congress created an exception that allowed for discharge within that five-year period if the loan caused “undue hardship.”

Congress extended the five-year bankruptcy ban to seven years in 1990. Then Congress extended it to the borrower’s lifetime in 1998.

The 1998 provision passed the House 414-4 and passed the Senate 96-0 before being signed into law by President Clinton.



https://theconversation.com/can-student-loans-be-cleared-through-bankruptcy-4-questions-answered-166308