Liz Weston: Unlock the debtor's prison of student loans

Earlier this year, a judge denounced the myth that student loans can’t be erased in bankruptcy court as she excused a Navy veteran from having to pay $221,000 in education debt. Bankruptcy judge Cecelia G. Morris’ decision garnered plenty of headlines, along with speculation that the ruling might make such discharges easier.

The battle isn’t over, though. A few days later, Morris’ ruling was appealed by the Education Credit Management Corporation, a nonprofit company that guarantees and services federal student loans for the U.S. Department of Education.

The reality is that getting student loans erased in bankruptcy, while technically possible, is so hard and expensive that few people try; even fewer succeed. Without intervention by Congress and a change of heart at the Education Department, struggling borrowers will continue to be trapped in a virtual debtor’s prison: unable to pay what they owe and unable to move on with their lives.

Taxpayer money is being wasted, as well. ECMC has a long history of aggressively opposing student loan discharges, even when there’s little hope of recovering any money. Among other cases, ECMC has notoriously fought bankruptcy relief for a woman diagnosed with pancreatic cancer; a formerly homeless woman with mental illness subsisting on Social Security disability payments; and, in the case of Navy vet Kevin Rosenberg, the subject of Morris’ ruling, a man whose basic living expenses exceeded his income.

Obviously, walking away from student loan debt should never be easy. But getting relief from unpayable education debt should never have become this hard.

That was the consensus of an expert group of bankruptcy judges, lawyers and scholars who studied the issue and made their recommendations public last year. The American Bankruptcy Institute’s Commission on Consumer...