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Sens. Dick Durbin (D-Ill.) and John Cornyn (R-Texas) recently introduced a bipartisan bill aimed at restoring the way that student loans are handled in bankruptcy. In contrast to other recent proposals, such as free college and a student loan jubilee, this legislation isn’t a flashy proposition — it’s a great idea, one that enjoys support from both sides of the aisle among policymakers and some experts, according to a commentary in The Hill. Over the past 30 years, a series of policy changes have made it more difficult for borrowers to have their student loans discharged in bankruptcy. These policy changes were driven by the idea that investments in education could not be transferred, because the borrower would always retain the benefits acquired from their education. This would make sense if degrees paid off uniformly with large dividends, but the reality is that some investments in education fall short of that mark — unpredictably offering little or no value to the borrower. Read more.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy. 

President Joe Biden's administration said it will extend the pause on federal student loan payments one last time, until Jan. 31, for a total of almost two years' reprieve for borrowers, USA Today reported. "This final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment," Secretary of Education Miguel Cardona said on Friday. Since the pandemic first struck, millions of student loan borrowers have been spared the obligation of paying on their accounts. The freeze had been scheduled to expire Sept. 30. It also included a 0% interest rate on loans, and the government had directed loan servicers to pause collection attempts. Collecting on the nation’s $1.6 trillion student loan bills is already a daunting task during normal times. Expecting borrowers to restart payments after they have been paused for nearly two years will be an even more difficult challenge. And the departure of two companies that had been running the government’s loan programs further complicates matters. Lawmakers and borrower advocates had said these colliding incidents warranted another extension of the federal student loan payment pause. Borrowers also wanted more time. In a survey conducted on behalf of the Pew Charitable Trusts, nearly two-thirds of borrowers said it would be difficult to start payments again if the moratorium lifted at September's end. Read more.

In a related Wall Street Journal editorial, Congress in March 2020 relieved borrowers from making payments on federal student loans and waived interest accumulation through last September. Like other “temporary” pandemic programs, the student loan reprieve has been repeatedly extended, first by President Trump and then Mr. Biden, even as the labor market has strengthened. Forbearance was supposed to expire at the end of September, but Education Secretary Miguel Cardona says a four-month extension is necessary to give borrowers “the time they need to plan for a restart.” They have the next two months to plan. Most don’t need that. The unemployment rate among bachelor’s degree recipients was 3.1% in July. Borrowers haven’t had to show they’ve been hurt by the pandemic to receive forbearance, and nearly 90% of the 43 million student borrowers as of March 2021 (the latest Education Department data) weren’t making payments. Forbearance is saving borrowers on average $400 per month, which many are using to invest or pay down higher-interest debt. Read more. (Subscription required.)
*The views expressed in this editorial are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The apartment was just what Chanque Jones needed: four bedrooms, and $500 cheaper than the run-down house she had been renting back in Chicago. It was a fresh start for her three sons, as well as for her mobile manicure business. Then an old eviction case turned up on a routine background check prepared for her landlord. It didn’t matter that she had gone to court and won. The fact that the case was filed at all was enough to mark her as a risk: what tenant advocates call a Scarlet E — the E standing for eviction, the New York Times reported. Eviction cases are a stubborn blot on any renter’s history. They are nearly impossible to scrub away, even if the tenant made good on obligations or it was only a scare tactic by an aggressive landlord. The pandemic has given the problem new urgency: Although the Biden administration has announced a new eviction moratorium for much of the country through Oct. 3, millions of renters are behind on their payments after more than a year of economic upheaval and could face eventual eviction.

Landlords filed a legal challenge to President Joe Biden’s extension of the coronavirus eviction moratorium until October, saying it goes against a ruling by the U.S. Supreme Court in July, Bloomberg News reported. The Biden administration’s edict should be struck down because the high court clearly said when it allowed the moratorium to be continued it was relying on an assurance from the Centers for Disease Control and Prevention that the agency had no intention of authorizing a further extension, according to a filing late Wednesday in the Atlanta-based federal court of appeals by the Alabama Association of Realtors. The CDC extended a ban on evictions in areas of the country with substantial and high transmission of COVID-19 on Tuesday, after a firestorm of criticism from Democrats following the lapse of a previous moratorium on Saturday. In July, the justices rejected calls by landlords and real-estate trade associations from Alabama and Georgia to block the moratorium while their challenge played out in court. Chief Justice John Roberts and Justice Brett Kavanaugh joined the court’s three liberals in the majority. Kavanaugh cast the pivotal vote, saying he was letting the ban stay in effect temporarily even though he thought the CDC had exceeded its power.

Lawmakers and housing advocates are struggling to figure out how to get billions of dollars in rental assistance to tenants who desperately need the help, even with the action taken Tuesday by the Biden administration to extend an eviction moratorium for most of the country, The Hill reported. Congress this year appropriated $46 billion for tenants and landlords in need, but only about $3 billion has reached the intended recipients. Concerns are now growing that unless a better method of distribution is developed, the U.S. will find itself in the same place two months from now when the new eviction ban expires. Similar to many facets of COVID-19 aid, state and local governments are finding it difficult to reach the hardest hit populations. Housing advocates across the country describe a complicated process that starts with putting the onus on tenants to apply for assistance. In many states, such as New York, the only way to access the application for rental assistance is online, an immediate hurdle for many since broadband internet access is often sparse in the very low-income areas that would benefit from the aid. “You need to be able to upload PDF documents in order to complete it. It’s a very long application that can take one to two hours to complete, and you have to do it all in one setting,” said Lucy Block, research and policy associate for the New York City-based Association of Neighborhood and Housing Development.

Legislation that would restore struggling borrowers’ right to eliminate student loans through bankruptcy has gained bipartisan support in the Senate, building momentum for a legal change long sought by consumer advocates, WSJ Pro Bankruptcy reported. Sens. Richard Durbin (D-Ill.) and John Cornyn (R-Texas) yesterday announced the "Fresh Start Through Bankruptcy Act," which would allow borrowers who file for personal bankruptcy the ability to discharge taxpayer-backed student loans after a 10-year waiting period. The legislation would also require colleges to partially repay the government for the cost of discharged loans if their students have consistently high default rates and low repayment rates, lawmakers said. About 45 million Americans hold roughly $1.7 trillion in student loans, more than 90% of which is guaranteed by taxpayers, lawmakers said. In March 2020, in response to the COVID-19 pandemic, principal payments and interest accrual on student loans guaranteed by the government were paused. The moratorium was extended earlier this year by President Biden to at least Sept. 30. Expiration of that moratorium would again expose defaulting borrowers to collection action. The Education Department is evaluating whether to relax the government’s stance on when borrowers should be able to discharge student loans, continuing a review started in 2018 by the Trump administration. President Biden has also considered forgiving some student-loan debt through executive action and said he would support forgiving up to $10,000 in student debt for every borrower. Read more. 

Click here to review the bill text. 

ABI’s Commission on Consumer Bankruptcy submitted a written statement for yesterday’s Senate Judiciary Committee hearing on student loan bankruptcy reform. To view the statement, please click here. 

Days after a national eviction moratorium expired, the Biden administration on Tuesday issued a new, more limited freeze that remains in effect through Oct. 3, NPR reported. Like the previous order, the two-month moratorium issued Tuesday comes from the Centers for Disease Control and Prevention. The new ban on evictions covers parts of the United States that are experiencing what the CDC calls "substantial" and "high" spread of the coronavirus. As of Tuesday afternoon, that's the vast majority of U.S. counties. The order, which cites the rise of the delta variant, says: "Without this Order, evictions in these [higher transmission] areas would likely exacerbate the increase in cases." The federal ban expired Saturday night, affecting millions of Americans who had the potential to be removed from their homes if they had fallen behind on rent. Since that moratorium's expiration, progressives had pressured the Biden administration to extend the pause on evictions. The administration previously said it didn't have the legal authority to issue a such a measure. The new order could face legal challenges. Gene Sperling, who oversees the White House's rollout of COVID-19 relief, told reporters on Monday that Biden had "quadruple-checked" whether he had the legal grounds to extend the moratorium unilaterally but said ultimately his hands were tied by a Supreme Court ruling that blocked the CDC from extending its past moratorium beyond the end of July. A last-minute effort by Congress to extend the ban failed.