[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2598 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 2598
To amend title 11, United States Code, to improve the treatment of
student loans in bankruptcy, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 4, 2021
Mr. Durbin (for himself and Mr. Cornyn) introduced the following bill;
which was read twice and referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To amend title 11, United States Code, to improve the treatment of
student loans in bankruptcy, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fostering Responsible Education
Starts with Helping Students Through Accountability, Relief, and
Taxpayer Protection Through Bankruptcy Act of 2021'' or the ``FRESH
START Through Bankruptcy Act''.
SEC. 2. EXCEPTIONS TO DISCHARGE.
Section 523(a) of title 11, United States code, is amended by
striking paragraph (8) and inserting the following:
``(8) for an educational benefit overpayment or loan made,
insured, or guaranteed by a governmental unit, or made under
any program funded in whole or in part by a governmental unit
or nonprofit institution, or for an obligation to repay funds
received as an educational benefit, scholarship, or stipend
received from a governmental unit or nonprofit institution,
unless--
``(A) excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor
and the debtor's dependents; or
``(B) the first payment on such debt became due
before the 10-year period (exclusive of any applicable
suspension of the repayment period) ending on the date
of the filing of the petition;
``(8A) unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor and the
debtor's dependents, for--
``(A) an obligation to repay funds received as an
educational benefit, scholarship, or stipend, other
than an obligation described in paragraph (8); or
``(B) any educational loan, other than a loan
described in paragraph (8), that is a qualified
education loan, as defined in section 221(d)(1) of the
Internal Revenue Code of 1986, incurred by a debtor who
is an individual;''.
SEC. 3. EFFECT OF DISCHARGE OF CERTAIN STUDENT LOANS.
Section 524 of title 11, United States Code, is amended by adding
at the end the following:
``(n)(1) In this subsection:
``(A) The term `cohort repayment rate', with respect to a
covered institution of higher education, means the percentage
of student borrowers who are making at least some progress
paying down their student loans within 3 years of entering
repayment.
``(B) The term `covered institution of higher education'
means an institution of higher education (as defined in section
102 of the Higher Education Act of 1965 (20 U.SC. 1002)) that--
``(i) is a participant in the Federal Direct Loan
Program under part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.); and
``(ii) has an enrollment of students that is not
less than 33 percent students who have received a loan
made, insured, or guaranteed under title IV of the
Higher Education Act of 1965 (20 U.S.C. 1070 et seq.)).
``(C) The term `covered student loan' means the original
principal of a loan--
``(i) the first payment on which became due before
the 10-year period (exclusive of any applicable
suspension of the repayment period) ending on the date
of the filing of the petition; and
``(ii) used by the debtor to make a payment to a
covered institution of higher education on behalf of
the debtor for the purpose of attaining an educational
benefit.
``(D) The term `Federal Direct PLUS Loan' means a Federal
Direct PLUS Loan under part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.)
``(2) If a covered student loan is discharged in a bankruptcy case
under this title, the covered institution of higher education to which
the debtor of the bankruptcy case made a payment with the covered
student loan shall pay to the Department of Education an amount
determined in accordance with the following:
``(A) An amount equal to 50 percent of the amount of the
covered student loan that is discharged, if the covered
institution of higher education, on the date on which the first
payment on the covered student loan became due--
``(i) had a cohort default rate (as determined
under section 435(m) of the Higher Education Act of
1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years
preceding that date that was equal to or more than 25
percent; and
``(ii) had a cohort repayment rate--
``(I) except for borrowers described in
subclause (II), that was equal to or less than
20 percent; and
``(II) with respect to borrowers who were
graduate or professional students who received
a Federal Direct PLUS Loan for enrollment at
the institution, that was equal to or less than
35 percent.
``(B) An amount equal to 30 percent of the amount of the
covered student loan that is discharged, if the covered
institution of higher education, on the date on which the first
payment on the covered student loan became due--
``(i) had a cohort default rate (as determined
under section 435(m) of the Higher Education Act of
1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years
preceding that date that was equal to or more than 20
percent and less than 25 percent; and
``(ii) had a cohort repayment rate--
``(I) except for borrowers described in
subclause (II), that was equal to or less than
25 percent and more than 20 percent; and
``(II) with respect to borrowers who were
graduate or professional students who received
a Federal Direct PLUS Loan for enrollment at
the institution, that was equal to or less than
40 percent and more than 35 percent.
``(C) An amount equal to 20 percent of the amount of the
covered student loan that is discharged, if the covered
institution of higher education, on the date on which the first
payment on the covered student loan became due--
``(i) had a cohort default rate (as determined
under section 435(m) of the Higher Education Act of
1965 (20 U.S.C. 1085(m)) for each of the 3 fiscal years
preceding that date that was equal to or more than 15
percent and less than 20 percent; and
``(ii) had a cohort repayment rate--
``(I) except for borrowers described in
subclause (II), that was equal to or less than
30 percent and more than 25 percent; and
``(II) with respect to borrowers who were
graduate or professional students who received
a Federal Direct PLUS Loan for enrollment at
the institution, that was equal to or less than
45 percent and more than 40 percent.''.
SEC. 4. EFFECTIVE DATE; APPLICABILITY.
This Act and the amendments made by this Act shall--
(1) take effect on the date that is 180 days after the date
of enactment of this Act; and
(2) apply to a petition filed or amended under this title
on or after the effective date under paragraph (1) with respect
to a debt for an educational benefit, overpayment, loan,
scholarship, or stipend of a debtor.
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