Joe Biden Changes Tune on Student Loan Discharge
As a Senator from Delaware, Joe Biden was a huge supporter of the financial services industry. In this capacity, he helped lead the charge to changes in the bankruptcy laws back during the George W. Bush presidency.
Now that he is running for President against Bernie Sanders, Biden has begun to change his tune on how bankruptcy laws should be applied. This is good news for those millions of Americans who collectively hold over a trillion in student loan debt.
Once Upon a Time, Student Loans were Fairly Easy to Discharge
Before the 2005 bankruptcy reforms, students had an easier time discharging their student loans in bankruptcy. Prior to 1976, student loans were dischargeable just like any other unsecured debt, such as credit cards.
Congress soon began limiting who could wipe out student loans. After 1976, regulations limited discharge to those students who had been making payments for 5 years. In 1990, a law lengthened the amount of time that loans had to be paid to 7 years before a student could seek discharge.
By 1998, however, the tide had shifted decisively. With the Higher Education Amendments of 1998, students could no longer discharge loans automatically after 7 years of repayment unless they could also show the loans posed an undue hardship. And in 2005, all qualified education loans were excepted from a bankruptcy discharge. Interestingly, Senator Biden was a prime backer of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.
Joe is Singing a New Song Today
According to Forbes, Biden is now saying that student loans should be dischargeable in bankruptcy. Of course, they already are dischargeable if a filer can show that he cannot maintain a minimal standard of living while paying loans and circumstances are not likely to change.
However, this a pretty high bar. Some courts practically require that a person is disabled and unable to hold gainful employment before they will discharge student loans.
Now Biden says he supports the plan set forth by Elizabeth Warren, who was formerly a candidate for the Democratic Party nomination for President. Warren supports allowing students to more easily discharge their student loans when they file.
However, Biden still does not support any plan to forgive student loan debt. Senator Sanders, who at this time of writing remains Biden’s only opposition to the nomination, would wipe out all student loans. Elizabeth Warren offered a scaled down version that would wipe out around $50,000 of debt for each student. Biden has yet to adopt either plan. Nevertheless, any loosening of bankruptcy restrictions is welcome.
Are Student Loans Dragging You Down?
With the recent government lockdowns regarding the novel coronavirus, many people are feeling financially stressed. Student loans can sometimes be discharged. Even if they can’t, wiping out other debts can often free up enough cash to apply to your loans.
Contact Nowack & Olson PLLC today. Our Plantation bankruptcy attorneys have helped 20,000 people in South Florida get on top of their debts. We are happy to talk to you if you schedule a free consultation by calling 888-813-4737.