Rules on Student Loans in Bankruptcy to Be Revisited
The Education Department is asking for public comments on evaluating claims of undue hardship. Currently, student loans can be discharged in bankruptcy only if there is an undue hardship, a term that has yet to be defined by Congress and the Department does not have the authority to define it. The Department is aware of their obligation to taxpayers to determine the most effective way to collect on federal student loans, but doesn’t want the federal government expending a lot of energy and money to attempt to collect debts that will never be repaid.
Meanwhile, the House and Senate have both introduced legislation that if passed, would allow private student loans to be discharged in bankruptcy. President of the Center for Academic Renewal, Jenna Robinson, told a Senate committee earlier this month that allowing private student loans to be treated like other loans in bankruptcy will give an incentive to lenders to lend more wisely which would ultimately decrease the private student loans awarded to students who cannot pay them back.