The Obama administration on Tuesday issued new guidance on how aggressively loan collectors should pursue borrowers of federally backed loans who are seeking to erase their debt in bankruptcy.
Federal law allows student loans to be wiped out in bankruptcy only if the debt imposes an "undue hardship" on the borrower, which is a higher standard than other types of consumer debt like credit cards and mortgages.
Congressional Democrats have long pushed to ease the requirements, and the Obama administration earlier this year indicated that it may support such a change to the bankruptcy code. Without congressional action, though, the Education Department doesn’t have the power to tell bankruptcy courts what standard to use in deciding whether to discharge student loans.
But even without changing the standard, the department has some control over how the entities responsible for collecting federally insured loans, known as guaranty agencies, pursue borrowers for that debt.
Read more at Inside Higher Ed: https://www.insidehighered.com/news/2015/07/08/education-department-clarifies-how-some-loan-collectors-pursue-bankrupt-borrowers