The Education Department's point person on student financial aid told Congress this week that the agency is working with the Justice Department to revise its bankruptcy policy for federal student loans, the Washington Post reported. "The process doesn't work well. It needs to be reformed . . . and we're committed to doing that," Richard Cordray, chief operating officer of the Office of Federal Student Aid, told a House education subcommittee on Wednesday. "There have been discussions already with the Justice Department. They, too, are willing to have us revise our approach." Discharging education debt through bankruptcy can be a Sisyphean task. Borrowers must bring a separate lawsuit — known as an adversary proceeding — within their bankruptcy case to have their student loans canceled. They must persuade the court the debt would impose an "undue hardship" and fend off the lender from thwarting their effort. As the creditor for $1.6 trillion in federal student loans, the Education Department has the right to contest a bankruptcy discharge to maintain the fiscal integrity of the lending program, and it routinely does so. But the agency also has an obligation to help destitute borrowers, consumer groups argue.
