LOAN Act

To amend the Truth in Lending Act to modify obligations relating to private education loans due to the disability of a cosigner or borrower of the loan, to amend title 11 of the United States Code to make student loans dischargeable, and for other purposes. 1. Short title This Act may be cited as the Lenders Offer Assistance Now Act LOAN Act 2. Disability of a cosigner or a borrower of a private education loan (a) In general Section 140(g) of the Truth in Lending Act ( 15 U.S.C. 1650(g) (1) in paragraph (1), by striking bankruptcy or death bankruptcy, death, or disability (2) by adding at the end the following new paragraphs: (3) Discharge in case of disability A lender that extends a private education loan shall discharge the student obligor’s liability on the loan if a student obligor experiences a disability. (4) Disability defined In this subsection, the term disability 20 U.S.C. 1087(a) . (b) Tax treatment of discharge Section 108(f)(5)(A) or (iii) pursuant to paragraph (3) of section 140(g) of the Truth in Lending Act, or . (c) Impact on certain programs Discharge of a private education loan due to disability of a borrower under paragraph (3) of section 140(g) of the Truth in Lending Act, as added by subsection (a), shall not be regarded as income and shall not be regarded as a resource for purposes of determining the eligibility of the borrower of such loan (or the borrower’s spouse or family) for benefits or assistance, or the amount or extent of benefits or assistance, under any Federal program or under any State or local program financed in whole or in part with Federal funds. (d) Applicability The amendments made by this section shall apply to private education loan agreements entered into on or after the date that is 180 days after the date of enactment of this Act. (e) Private education loan defined In this section, the term private education loan 15 U.S.C. 1650(a) 3. Exception to discharge (a) In general Section 523(a) of title 11, United States Code, is amended— (1) by striking paragraph (8); and (2) by redesignating paragraphs (9) through (14B) as paragraphs (8) through (14A), respectively. (b) Conforming amendments Title 11, United States Code, is amended— (1) in section 704(c)(1)(C)(iv)(I) by striking (14A) (14) (2) in section 1106(c)(1)(C)(iv)(I) by striking (14A) (14) (3) in section 1202(c)(1)(C)(iv)(I) by striking (14A) (14) (4) in section 1328(a)(2) by striking (8), or (9) or (8) (c) Effective date; application of amendments (1) Effective date Except as provided in paragraph (2), this section and the amendments made by this section shall take effect on the date of the enactment of this Act. (2) Application of amendments The amendments made by this section shall apply only with respect to cases commenced under title 11 of the United States Code on or after the date of the enactment of this Act.

Summary: Lenders Offer Assistance Now Act or the LOAN Act This bill requires the discharge of a private education loan in the event of the student borrower's disability. Such a discharge is not considered income for tax or other purposes. Additionally, the bill prohibits the automatic default of a private education loan due to the disability of a loan cosigner. Furthermore, the bill generally permits the discharge of student loans in bankruptcy. Under current law, student loans are not dischargeable in bankruptcy unless repayment would be an undue hardship to the debtor and the debtor's dependents.