Proposed legislation in Congress would allow borrowers to discharge their private student loans -- but not federally guaranteed loans -- after five years of repayment.
The bill, S 1561, was introduced in June by Sen. Richard J. Durbin, Democrat of Illinois, and is now pending before the Judiciary Committee. While the measure's future is uncertain, it may be attached to other legislation moving through Congress this year.
Supporters say the bill would provide much-needed relief to borrowers who find themselves in severe financial distress, while discouraging banks from making loans to students who are likely to default. They argue that it is unfair for the government to treat student loans more harshly than other forms of unsecured debt.
"We are more forgiving of the middle-aged guy who buys a Corvette and stops making payments than we are of the 22-year-old who goes to college and drops out," says Luke Swarthout, a higher-education advocate with the U.S. Public Interest Research Group. "If our laws are a reflection of our values, is that our value system?"