Congress Proposes Means-Tested Discharge for Student Loans

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By Mark Kantrowitz

July 23, 2020

Rep. Mary Gay Scanlon (D-PA-5) introduced legislation on July 16, 2020 to allow borrowers affected by the coronavirus pandemic to discharge their student loans in bankruptcy.

The COVID-19 Student Loan Relief Act of 2020 (CSLRA) will allow federal and private student loans to be discharged in bankruptcy if the borrower’s income has decreased because of the pandemic or if a primary wage earner in their family dies or becomes seriously disabled because of COVID-19.

See also: 7 Ways to Get Student Loans Discharged

To qualify for a discharge, the borrower’s income would have to decline by 20% if their prior income was less than $75,000 per year, by 30% if their prior income was $75,000 to $125,000 per year and by 40% if their prior income was $125,000 or more per year.

Borrowers would not have to prove undue hardship or undergo an adversarial proceeding to discharge their student loans

This bankruptcy discharge will last for the duration of the coronavirus pandemic, if enacted.

See also: How to Discharge Student Loans in Bankruptcy

Thinking of putting your student loans in deferment? Use our Cost of Deferment Calculator to see what it could cost.




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