The Obama administration wants to allow people to get rid of their student loan debt through bankruptcy — but only if the debt is owed to private lenders rather than by the federal government. The Wall Street Journal reports:
The recommendation, in a report by the Education Department and the Consumer Financial Protection Bureau, wouldn't affect the vast majority of student debt, which is issued by the federal government. It would apply only to the roughly $150 billion, or 15% of total outstanding student debt, issued by private lenders such as SLM Corp.'s Sallie Mae and Wells Fargo & Co....
Expanding the concept to federal loans would be politically controversial given that it would likely result in taxpayer losses...
When the government gets into a business, like student loans, it sometimes tries to write the rules so that it is harder for any privately owned competition to succeed.