June 21, 2019

Cortez Masto Cosponsors Bill to Make Bankruptcy Relief Available for Student Loan Borrowers

Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.) today cosponsored a bicameral bill that would give Americans overwhelmed by student loan debt the option of obtaining meaningful bankruptcy relief. Introduced by Senators Richard J. Durbin (D-Ill.) and Elizabeth Warren (D-Mass.), the Student Borrower Bankruptcy Relief Act of 2019 would eliminate the section of the bankruptcy code that makes private and federal student loans nondischargeable, allowing these loans to be treated like nearly all other forms of consumer debt.

“Americans hold $1.5 trillion in student loan debt, yet this financial burden isn’t treated like other loans. The current system prohibiting bankruptcy relief is just not fair. Nevada’s students are among the most hardworking and talented people in the nation. I’m proud to co-sponsor legislation that treats student loans like all other forms of consumer debt, granting students more flexibility when they face hard times and creating a stable path for healthy financial futures.”

In addition to Senators Cortez Masto, Durbin and Warren, U.S. Senators Tammy Baldwin (D-Wis.), Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio), Kamala Harris (D-Calif.), Maggie Hassan (D-N.H.), Mazie Hirono (D-Hawaii), Amy Klobuchar (D-Minn.), Patrick Leahy (D-Vt.), Edward J. Markey (D-Mass.), Jeffrey A. Merkley (D-Ore.), Jack Reed (D-R.I.), Bernard Sanders (I-Vt.), Jeanne Shaheen (D-N.H.), Chris Van Hollen (D-Md), Jacky Rosen (D-Nev.), Tammy Duckworth (D-Ill.) and Sheldon Whitehouse (D-R.I.) also cosponsored this bill.

Representatives Jerrold Nadler (D-N.Y.), and John Katko (R-N.Y.) introduced companion legislation in the U.S. House of Representatives.

The Student Borrower Bankruptcy Relief Act of 2019 is supported by organizations including Americans for Financial Reform, the Center for Responsible Lending, Consumer Federation of America, Consumer Reports, the National Association of Consumer Advocates, the National Association of Consumer Bankruptcy Attorneys, the National Consumer Law Center (on behalf of its low income clients), National Student Legal Defense Network, Public Citizen, U.S. PIRG, and Young Invincibles. 

Full text of the bill is available here.


Student debt has not always been given special exemption by the bankruptcy code. Prior to 1976, federal and private student loan debt were both fully dischargeable. Congress then began steadily narrowing the grounds upon which student loan bankruptcy relief could be granted until, in 1998, federal student loans were made completely nondischargeable absent a showing of “undue hardship” which courts have construed to be nearly impossible to demonstrate. In 2005, Congress also made private student loans nondischargeable in bankruptcy. As a result, student borrowers who find themselves unable to repay their loans are now saddled with this debt for life.   

Forty-four million Americans owe more than $1.5 trillion in student loan debt. Cumulative student loan debt has surpassed credit card debt to become the second largest category of private consumer debt after mortgages, and student loan debt is the fastest-growing segment of U.S. household debt, increasing by 157 percent since 2007. Nondischargeable student debt is constraining the career and life choices of student borrowers, and analyses by the Federal Reserve show that the student debt burden is affecting the broader economy.