Private Loan Disability Discharge Act of 2021
Bill: H.R.2498 | Sponsor: Rep. Dean, Madeleine (D-PA)
Policy area: Finance and Financial Sector

Summary:
Private Loan Disability Discharge Act of 2021
This bill directs the holder of a private education loan to discharge the loan in the event of the borrower's death or total and permanent disability. The obligation of a cosigner for a private education loan is also discharged in the event of total and permanent disability of the borrower. The bill also extends indefinitely the exclusion of student loan debt discharge from gross income for federal income tax purposes.

To provide for the discharge of a private education loan in the case of 
 death or total and permanent disability of a student obligor, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Private Loan Disability Discharge 
Act of 2021''.

SEC. 2. PROTECTIONS FOR OBLIGORS AND COSIGNERS IN CASE OF DEATH OR 
              TOTAL AND PERMANENT DISABILITY.

    (a) In General.--Section 140(g) of the Truth in Lending Act (15 
U.S.C. 1650(g)) is amended--
            (1) in paragraph (2)--
                    (A) in the heading, by striking ``in case of death 
                of borrower'';
                    (B) in subparagraph (A), by inserting after ``of 
                the death'', the following: ``or total and permanent 
                disability''; and
                    (C) in subparagraph (C), by inserting after ``of 
                the death'', the following: ``or total and permanent 
                disability''; and
            (2) by adding at the end the following:
            ``(3) Discharge in case of death or total and permanent 
        disability of borrower.--The holder of a private education loan 
        shall, when notified of the death or total and permanent 
        disability of a student obligor, discharge the liability of the 
        student obligor on the loan and may not, after such 
        notification--
                    ``(A) attempt to collect on the outstanding 
                liability of the student obligor; and
                    ``(B) in the case of total and permanent 
                disability, monitor the disability status of the 
                student obligor at any point after the date of 
                discharge.
            ``(4) Total and permanent disability defined.--For the 
        purposes of this subsection and with respect to an individual, 
        the term `total and permanent disability' means the individual 
        is totally and permanently disabled, as such term is defined in 
        section 685.102(b) of title 34 of the Code of Federal 
        Regulations.
            ``(5) Private discharge in cases of certain discharge for 
        death or disability.--The holder of a private education loan 
        shall, when notified of the discharge of liability of a student 
        obligor on a loan described under section 108(f)(5)(A) of the 
        Internal Revenue Code of 1986, discharge any liability of the 
        student obligor (and any cosigner) on any private education 
        loan which the private education loan holder holds and may not, 
        after such notification--
                    ``(A) attempt to collect on the outstanding 
                liability of the student obligor; and
                    ``(B) in the case of total and permanent 
                disability, monitor the disability status of the 
                student obligor at any point after the date of 
                discharge.''.
    (b) Tax Liability.--Section 108(f)(5)(A) of the Internal Revenue 
Code of 1986 (26 U.S.C. 108(f)(5)(A)) is amended--
            (1) by striking ``, and before January 1, 2026'';
            (2) in clause (ii), by striking ``or'';
            (3) by redesignating clause (iii) as clause (iv); and
            (4) by inserting after clause (ii) the following:
                            ``(iii) pursuant to paragraph (3) or (5) of 
                        section 140(g) of the Truth in Lending Act, 
                        or''.
    (c) Rulemaking.--The Director of the Bureau of Consumer Financial 
Protection may issue rules to implement the amendments made by 
subsection (a) as the Director determines appropriate.
    (d) Effective Date.--The amendments made by this section shall take 
effect 1 year after the date of the enactment of this Act.
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