Reverse the 2005 reform law, that private student loans cannot be discharged in bankruptcy.

Our government needs to reverse the Bankruptcy Reform Act of 2005 for college loans. The US Bankruptcy Code at 11 USC 523(a)(8) requires borrowers who want to get a bankruptcy discharge for their student loans to demonstrate in an adversary proceeding that repaying their student loans “would impose an undue hardship on the debtor and the debtor’s dependents.” This is a very difficult requirement and most bankruptcy attorneys don’t even try. Roughly 72,000 borrowers in bankruptcy in 2008, less than 0.4% sought a bankruptcy discharge for their student loans. Less than half those cases have been resolved, and of them less than 22% had all or part of their student loans discharged. The number of defaults has increased. Private loans have no limit to the amount of interest they can charge.