UNCF Opposes Fresh Start Bankruptcy Act

UNCF (formerly known as the United Negro College Fund) opposes the proposed Fresh Start Bankruptcy Act in Congress which provides student loan relief.

What does the Fresh Start Bankruptcy Act do?

As a short refresher, the Fresh Start Bankruptcy Act provides an easier way to discharge, or wipe out, student loan debt. A person filing for bankruptcy must wait 10 years before the federally backed student loans are automatically wiped out.

Why would UNCF be against student loan relief?

UNCF is not against allowing debtors to receive student loan relief. They are concerned with a provision of the Act that would provide risk-sharing from colleges. The Fresh Start Act requires colleges that have more than a third of their students receiving federal student loans to partially reimburse the government for loans discharged in bankruptcy if the college consistently has high default rates.

UNCF states that Historically Black Colleges and Universities (HBCUs) would be disproportionately impacted negatively by the Fresh Start Act. HBCUs have a higher proportion of students that borrow student loans. Serving a higher proportion of students with loans could lead to HBCUs paying a larger proportion in penalties to the government if students default.

Institutional risk-sharing has a possibility of bankrupting historically Black colleges and universities and keeping low-income student of color from attending college.

Dr. Michael L. Lomax, UNCF President and CEO

What alternatives do UNCF support?

UNCF supports the baseline provisions of the Fresh Start Act that allow debtors to discharge student loans in bankruptcy. Some alternatives UNCF suggests are replacing the risk-sharing provisions with incentives for serving at-risk students. They also call for interest rates to be lowered and origination fees to be eliminated in order to reduce the cost of borrowing for college.

Any updates to the Fresh Start Bankruptcy Act?

At this time there has not been any updates to the Fresh Start Bankruptcy Act. The bill remains in the Senate Judiciary Committee. Caldwell Law will keep you posted with any changes to this bill.