Bill Would Let ?Medically Distressed? Cast Off Student Loans

August 1, 2014
Wall Street Journal 
student loan news
A proposal has been put forth to allow college graduates with heavy medical debt to eliminate their student loans. Sen. Sheldon Whitehouse (D-R.I.) introduced the Medical Bankruptcy Fairness Act, which permit the discharge of student loan debt for borrowers who paid more than $10,000 in medical bills in the three years before bankruptcy.

Northeastern University law professor Daniel Austin says the average person who filed for bankruptcy in 2013 had about $8,595 in medical debt. He estimates that more than half of the people who have filed for bankruptcy in recent years would qualify. About 30 percent of people who file for bankruptcy with medical debt also have student loans.

The bill is unlikely to pass due to strong opposition from the financial services industry. It has support from only two other lawmakers: Sen. Elizabeth Warren (D-Mass.) and Sen. Richard Durbin (D-Ill.). Whitehouse’s student-loan relief is a new provision, but it is part of a bill that is several years old. Another provision in the bill would allow “medically distressed debtors” to keep up to $250,000 worth of property through a homestead exemption.

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