There is an easy fix for the student loan debt crisis. Bankruptcy laws should be restored to give back to the bankruptcy courts the responsibility of deciding whether or not to give relief to give individuals who claim they can’t pay. We need to take this out of the hands of the bureaucracy in the Department of Education. The bankruptcy courts were in charge of the process before there ever was a student loan bubble. In a nutshell, bankruptcy used to discharge student loans. That is, provided the borrower had owed the money for a specified length of time and had proved the inability to pay anything back. Borrowers who don’t want to expose themselves to the strictures of the bankruptcy process should continue to owe what they borrowed.
It was ill advised policy to take bankruptcy law out of the student loan relief equation. (A tiny exception remains for the almost impossible to achieve “undue hardship” bankruptcy discharge). The present crisis is the fruit of that ill advised policy change. The elimination of a bankruptcy discharge removed an important safety valve which used to protect the economy from the explosive pressures now referred to as a student loan debt bubble.
We can fix the problem with no need to expand the court system.