Katko leads bipartisan effort to amend bankruptcy law’s treatment of student debt

Federal bankruptcy rules would be reformed to allow student debt, like other forms of debt, to be discharged under bipartisan legislation introduced by U.S. Rep. John Katko (R-NY) on Monday.

The Discharge Student Loans in Bankruptcy Act, H.R. 2366, which Katko introduced with U.S. Rep. John Delaney (D-MD), would address provisions of federal bankruptcy rules so that student debt is treated like other forms of debt, including credit card and mortgage debt.

“In this economy, new graduates are faced with many difficulties as they transition out of college and enter the workforce – and student loan debt is at the top of that list,” Katko said. “Addressing the high cost of college and the crushing burden of student loan debt requires innovative and thoughtful changes in policy.”

By allowing the discharging of student loan debt under certain circumstances, a borrower would be released from the obligation to repay his or her loan.

Student loan debt reached $1.3 trillion in 2016, which marked the 18th consecutive year of a cumulative year-over-year increase, according to the Federal Reserve Bank in New York.

“In the case where financially stressed student loan borrowers have no other option but to seek bankruptcy relief, these individuals are unable to discharge their student loan debt,” Katko continued.

“While this is a last option for many, it should not be the case that student loan debt is the only form of debt that cannot be discharged and the measure that I’ve put forth with Rep. Delaney corrects that problem. We must continue to explore ways to make borrowing simpler and more manageable for students so that higher education can remain accessible to students from all backgrounds,” Katko added.

Student debt has been a priority for Katko during his time in Congress. He previously co-sponsored the Student Loan Refinancing Act to allow federal student loans to be refinanced more than once and the Flexible Pell Grants for 21st Century Students Act to enable students to use Pell Grants during summer months.