Bankruptcy Protection Bill for Private Student Loans Advances in Congress

Shannon Rasberry  After being stalled since April, proposed legislation has advanced in the U.S. House of Representatives that would treat private student loans like almost all other consumer loans, allowing struggling borrowers to have their debt from private student loans discharged in bankruptcy.

The Private Student Loan Bankruptcy Fairness Act (H.R. 5043), originally introduced in the House on April 15 by Reps. Steve Cohen of Tennessee and Danny Davis of Illinois, was passed by a House subcommittee on Sept. 15. The proposed legislation would reverse a provision of a lender-friendly bankruptcy reform bill that, in 2005, created special protections for lenders of private student loans, making private student loans almost impossible to discharge in bankruptcy, unlike most every other form of private consumer debt.