WASHINGTON — Today, Representative Lou Correa (CA-46), alongside 16 of his colleagues, introduced the Student Loan Bankruptcy Improvement Act of 2025, legislation that would help provide relief from crippling debt to more student loan borrowers. While still holding borrowers accountable, Correa’s legislation would update the standard that has kept millions from achieving a financial fresh start by loosening the criteria for student loan discharge.
"Too many smart, hard-working Americans are drowning in student loans that keep them from fully contributing to our economy,” Correa said. "The bankruptcy courts should be open and accessible to these hard-working Americans, balancing the interests of both debtors and creditors."
“Millions of Americans are already struggling to make ends meet while also paying off their student loans,” said Senator Booker. “This legislation will loosen the stringent requirements in place that keep eligible borrowers from being discharged from their loans. By changing the standard of hardship, we can finally make it easier for student loan borrowers who need relief to get relief.”
The Student Loan Bankruptcy Improvement Act would remove the term “undue” from debt relief requirements to give borrowers a better chance of getting a financial relief. Of the nearly 43 million student loan borrowers nationwide who may need some form of student loan debt relief, they must present “undue hardship”--a standard that is nearly impossible to reach. This legislation would provide the 82,910 student loan borrowers in California’s 46th Congressional District with the opportunity to ease their financial hardships, create a sustainable pathway out of debt, and continue to contribute to the financial success of their communities on Main Street.
In addition to Rep. Correa, this legislation has been co-sponsored by Representatives Alma Adams (D-NC), Becca Balint (D-VT), Troy Carter (D-LA), Cleo Fields (D-LA), Pramila Jayapal (D-WA), Hank Johnson (D-GA), Summer Lee (D-PA), Zoe Lofgren (D-CA), Eleanor Holmes Norton (D-DC), Deborah Ross (D-NC), Eric Swalwell (D-CA), Rashida Tlaib (D-MI), Shri Thanedar (D-MI), Paul Tonko (D-NY), Nydia Velazquez (D-NY). During a House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust hearing earlier this week entitled "Bankruptcy Law: Overview and Legislative Reforms," witnesses voiced support for Correa’s proposal to remove the term “undue” from debt relief requirements:
“The standard we’re required to follow in the courts is ‘Undue Hardship [...] if legislation removes the word ‘Undue’ from that term, the court will have to rethink the standard. […]. It will reform student loan treatment in bankruptcy,” said Judge Michelle Harner, Bankruptcy Judge. District of Maryland.
“It’s a surgical way to correct the problem of ‘Brunner’. ‘Brunner’ was a mistake but Brunner now binds all bankruptcy judges. This was a mistake to have the Brunner test which emerged under different circumstances. This particular surgical approach, which essentially enables judges to press the reset button and reconsider how to strike the balance is an excellent idea,” said Douglas Baird, Professor of Law at the University of Chicago.
“The reset reference is exactly what I was thinking as well. Certain courts have said they have no reason to back away from the very harsh interpretation of ‘undue hardship’ because Congress has kept that part the same, even as it changed the other pieces. This would send the message to circuit courts and invite other courts to use a more appropriate standard,” said Melissa Jacoby, Professor of Law at the University of North Carolina, Chapel Hill.”
This legislation has also been endorsed by: Consumer Federation of America, National Association for College Admission Counseling, National Association of Student Loan Lawyers, The Century Foundation, National Consumer Law Center, Center for Responsible Lending, and National Association of Consumer Bankruptcy Attorneys.
You can watch the full exchange in the Subcommittee on the Administrative State, Regulatory Reform, and Antitrust HERE. You can also read the full text of the legislation HERE.
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ABOUT LOU: Congressman Lou Correa is a longtime Orange County resident, with deep local roots. To this day, he lives only three miles from his childhood neighborhood in Anaheim. He is the son of working-class parents whose hard work gave him a chance at success, and has spent his career fighting to protect the American Dream, and ensure anyone can reach the middle class, just as he did. In 2016, Lou was elected to the U.S. House of Representatives to continue his work by representing the community he has spent the past 20 years serving, fighting to give everyone access to the same opportunity he had. Congressman Correa is committed to working across party lines to strengthen the middle class and give everyone a shot at the American Dream by investing in education, healthcare, and our fading infrastructure, and has introduced legislation to protect the legal rights of immigrants, care for veterans, and fight against the wasteful spending of taxpayer money.