December 13, 2007

Rep. Tim Walberg introduces bill to restore student loan protections

Posted in Legislation Affecting Students at 7:38 AM by Joe From Boston

Several years ago some big student loan companies got congress to remove bankruptcy protections for student loans.  That means that even if you declare bankruptcy, you still need to pay back all your student loans as well as all fees you may have accrued by not paying for a time.

Congressman Tim Walberg from MI wants to change that.  HR 4344 is a bill that amends the Higher Education Act of 1965 and changes the definition of economic hardship.

This bill would help restore some student loan protections for graduates with high debt levels and would also protect medical school graduates and other borrowers with high debt-to-income ratios after graduation.

The bill defines economic hardship as:

  • Borrowers working full-time that have a Federal educational debt burden that equals or exceeds 20 percent of their adjusted gross income, and the difference between their adjusted gross income minus such burden is less than 220 percent of the greater of the annual earnings of an individual earning the minimum wage under section 6 of the Fair Labor Standards Act of 1938.  (known as the 20/220 rule)
  • 150 percent of the poverty line, as defined under section 673(2) of the Community Services Block Grant Act, applicable to such borrower’s family size.

The bill will now go to a committee for consideration.