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 Action is occurring in the Senate to allow private student loans to be discharged in bankruptcy. On May 25, U.S. Senator Dick Durbin (D-IL) reintroduced The Fairness for Struggling Students Act, S. 1262, to give private student loans the same treatment as nearly all other forms of private unsecured debt. U.S. Senators Sheldon Whitehouse (D-RI), Al Franken (D-MN), Richard Blumenthal (D-CT), Mazie Hirono (D-HI), Elizabeth Warren (D-MA), Jack Reed (D-RI), Ron Wyden (D-OR), Tammy Baldwin (D-WI), and Maggie Hassan (D-NH) cosponsored the legislation. NACBA stands in support of S. 1262, but will continue to push for support of a broader bill to allow both federal and private student loans to be discharged. Read NACBA’s full response and follow updates on S. 1262.
Also on May 25, Senator Chuck Grassley (R-IA) introduced to the Senate S. 1237. This bill would amend title 11 of the United States Code to clarify the rule allowing discharge as a nonpriority claim of governmental claims arising from the disposition of farm assets under chapter 12 bankruptcies, and is one Senator Grassley has introduced before in Congress. Text of the bill is not yet available.
In the House, Congressman Steve Cohen (D-TN) introduced H.R. 2527, The Private Student Loan Bankruptcy Act of 2017. H.R. 2527 would amend title 11 of the United States Code to modify the discharge of debts for certain educational payments and loans. There are 21 Democratic cosponsors, and the bill is currently being referred to the House Committee on the Judiciary.
More on H.R. 2366. There have been three additional Democratic cosponsors to this bipartisan legislation including: Representatives Jacky Rosen (D-NV), Adriano Espaillat (D-NY), and Peter DeFazio (D-OR).
House Representative Ryan Costello (R-PA) introduced the Match Veterans to Student Loan Protections (MVP) Act with Representatives Kyrsten Sinema (D-AZ) and Lou Barletta (R-PA). The MVP Act would ensure veterans who incur a total and permanent disability are proactively identified and notified of their eligibility for student loan discharge. Original cosponsors of the legislation also include Representatives Mike Coffman (R-CO), Bradley Byrne (R-AL), Suzanne Bonamici (D-OR), Mark Takano (D-CA), and Dina Titus (D-NV).
Lastly, the House Committee on Judiciary held a markup hearing on May 3. During this hearing, H.R. 2266 The Bankruptcy Judgeship Act of 2017 passed through Committee. This Act is now referred to the Senate, and if passed would amend title 28 of the United States Code to authorize the appointment of additional bankruptcy judges.
In The Agencies The Department of Education supports a plan to consolidate servicing of more than $1 trillion in federal student loans. Where there used to be nine companies doing it, now there will be just one. The government will still bear the financial risk of lending to students and their families for school costs, but once it picks a unified servicing contractor, that company will be the main entity borrowers interact with for payments and other account tasks. It estimates the move will save about $130 million in the next five years.
News from the U.S. Department of Justice has been released revealing that the U.S. Trustee Program that oversees bankruptcy administration is proposing adjustments to quarterly fees for the largest Chapter 11 debtors. The new structure would switch most payments to percentage of disbursements, instead of the current flat rate scheme, and would significantly increase costs on big cases. The proposed fee structure would increase quarterly fees paid by Chapter 11 debtors with quarterly disbursements of at least $1 million to an amount equal to 1% of disbursements or $250,000, whichever is less. Beginning in 2021, the director would be permitted to adjust the fee once a year.