H.R. 4444

119 HR 4444 IH: Student Loan Bankruptcy Improvement Act of 2025
 U.S. House of Representatives
 2025-07-16
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 I  119th CONGRESS  1st Session  H. R. 4444  IN THE HOUSE OF REPRESENTATIVES   July 16, 2025   Mr. Correa  (for himself,  Ms. Adams ,  Ms. Balint ,  Mr. Carter of Louisiana ,  Mr. Fields ,  Ms. Jayapal ,  Mr. Johnson of Georgia ,  Ms. Lee of Pennsylvania ,  Ms. Lofgren ,  Ms. Norton ,  Ms. Ross ,  Mr. Swalwell ,  Ms. Tlaib ,  Mr. Thanedar ,  Mr. Tonko , and  Ms. Velázquez ) introduced the following bill; which was referred to the  Committee on the Judiciary    A BILL
To provide a more equitable discharge standard for student loan borrowers.
1.
Short title
This Act may be cited as the   Student Loan Bankruptcy Improvement Act of 2025  .
2.
Findings
The Congress finds the following:
(1)
Student loan borrowers deserve an opportunity to discharge debt using a fair, nation-wide standard for relief.
(2)
The current standard of  undue hardship  fails to provide an achievable avenue for relief of student loan debt requiring significant costs and a paperwork burden.
(3)
Student loan borrowers rarely meet the arbitrary and draconian standard of  undue hardship,  especially in jurisdictions using the  Brunner  test, with only 0.01% successfully being discharged as of 2022.
(4)
The criteria utilized in the  Brunner  test, which is used by most bankruptcy courts in the United States, is inconsistent with the main goal of bankruptcy of giving honest debtors a  fresh start,  enabling them to more fully participate and contribute to the economy.
(5)
The  Brunner  test was developed by the courts decades ago when debtors could discharge their student loans in bankruptcy by simply waiting five or seven years—it should no longer be used now that the waiting period for discharge was eliminated by Congress.
(6)
By changing the standard of hardship, Congress would provide bankruptcy courts with needed flexibility to adopt more reasonable criteria in determining discharge standards for student loan debt.
(7)
Adopting this new  hardship  standard does not negate requirements for discharge under bankruptcy proceedings like means testing, disclosure requirements, and exemption limitations, securing bankruptcy’s integrity and benefitting both debtors and creditors who have an increased opportunity for repayment.
(8)
As of June 2025, around six million borrowers of Federal student loans are passed due by at least 90 days.
(9)
A majority of borrowers with 90 days or more past due student loans as of June 2025 could move into default by September 2025.
(10)
Millions of student loan borrowers are facing significant credit score declines making it more expensive or difficult to get necessary insurance, loans, and credit cards.
(11)
The vast majority of debtors seeking bankruptcy discharges for student loans never obtained degrees or got degrees that have not enabled them to secure better employment or have a higher earning potential as predicted when Congress adopted the  undue hardship  standard.
(12)
According to a Duke Law Journal article, between 2011 and 2019, less than 0.1 percent of applications made by student loan debtors in bankruptcy court seeking a discharge of student loan debt were successful, largely because attorneys discourage their clients from seeking an adversary proceeding on the belief that it is too hard to meet the undue hardship standard.
(13)
Each year, less than one percent of the approximately 250,000 people who file for bankruptcy seek to discharge student loan debt based on  undue hardship,  a mere fraction of the nearly 43 million people who have Federal student loan debt.
(14)
Between November 2022 and September 2024, approximately 2,500 people sought to discharge student loan debt through bankruptcy.
(15)
The Department of Education (Department) recently reported that twenty percent of borrowers are in default and another four million are between three and six months behind on their payments. The Department estimates that as many as 10 million borrowers could be in default within a few months.
(16)
There is little evidence of debtors abusing the bankruptcy system by seeking unfair discharges of student loan obligations, a concern raised by Congress when it adopted the  undue hardship  standard.
(17)
The concerns of abuse were addressed and minimized with the passage in 2005 of the Bankruptcy Abuse Prevention and Consumer Protection Act with the enactment of a rigorous Means Test to evaluate debtors’ ability to repay debts.
(18)
Student loan debt owed by Americans who file for bankruptcy with student loans is often never paid, whereas bankruptcy proceedings provide an opportunity to address this reality.
(19)
With the restart of student loan collections, the number of borrowers with student loan debt is expected to rise. The change to a  hardship  standard will facilitate fair and appropriate discharges and repayment plans.
3.
Amendment 11
Section 523(a)(8) of title 11, United States Code, is amended by striking  undue .
4.
Application of amendment
The amendment made by this Act shall apply with respect to cases commenced before, on, and after the date of the enactment of this Act.