This is the latest update from Washington, designed to keep NACBA members informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks. Feedback should be directed to Krista.DAmelio@NACBA.com
ON THE HILL The Trump administration announced on Wednesday, February 21st that it plans to review the high standard borrowers must meet to get rid of federal student loans in bankruptcy. While it is still too early to tell whether that’s good news for struggling borrowers, in a memo circulated Tuesday, the Department of Education (DOE) requested public comment on what loan holders should consider when evaluating a borrower’s request to have their debts discharged in bankruptcy. The DOE’s request for input indicates an interest in revisiting the government’s approach to these cases.
On Wednesday, February 14th, the House passed H.R. 3299 Protecting Consumers’ Access to Credit Act of 2017. This bill amends the Revised Statutes, the Home Owners’ Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act to state that bank loans that are valid when made as to their maximum rate of interest in accordance with federal law shall remain valid with respect to that rate regardless of whether a bank has subsequently sold or assigned the loan to a third party.
IN THE AGENCIES On Thursday, February 22, 2018 the Congressional Research Service released a report titled “Bankruptcy and Student Loans”. The report explains how and why the Bankruptcy Code makes student loans nondischargeable, unless undue hardship is proven. It concludes with providing potential considerations for Congress to treat student loans moving forward. Click here to read the full report
On February 7th, the Consumer Financial Protection Bureau announced that due to a recent change in federal law, borrowers whose student loans are forgiven on or after Jan. 1, 2018, due to “death or total and permanent disability” no longer have to pay federal income taxes on those forgiven loans. Now, when the Department of Education or a private lender forgives a student loan due to a borrower’s death or disability, the amount of forgiven debt no longer counts as income and does not cause a borrower’s federal taxes to go up. Prior to this change some borrowers with disabilities faced financial distress driven by a tax bill because they qualified for debt relief.