The Wall Street Journal reported today that the White House is weighing whether to make it easier for Americans to discharge student loans through bankruptcy.
Federal law prohibits student loans — whether made by private lenders or the federal government — from being wiped out in bankruptcy, except in rare circumstances.
In a presidential memorandum today, President Barack Obama directed administration officials to study whether to push for legislation to loosen the rules imposed on “all student loan borrowers” in the bankruptcy process.
The effort was announced as part of a broad initiative the White House labeled a “Student Aid Bill of Rights.” The other steps under Obama’s plan include setting up a system for borrowers to register complaints about the companies, known as servicers, that collect student-loan payments on behalf of the government. The servicers would face stricter federal oversight and new rules designed to make them more proactive in reaching out to distressed borrowers and offering better repayment terms.