Even if Congress bucks the banks and passes substantive student lending reform, it will have little effect on many of those currently struggling to pay off education debt. That's because Congress slipped a provision into the 2005 bankruptcy bill making it impossible for borrowers to discharge private student loans. Added in a secret conference committee without any public debate or public sponsor, the measure lumped student loans in with a small number of debt obligations -- including child support responsibilities, overdue taxes, and criminal fines -- that can't be liquidated under Chapter 7 or reorganized under Chapter 13. Practically, it means that a student with mounds of private debt must pay it all back, even if their financial situation has landed them in bankruptcy.

During recent congressional sessions, two Illinois members of Congress -- Sen. Dick Durbin and Rep. Danny Davis -- worked hard to restructure the law, but were ultimately unsuccesful. According to USA Today, both of them are gearing up to make the push again.

Back in June 2007, Durbin introduced Senate Bill 1561, which would have taken the bankruptcy law back to where it was before 2005. After two readings, it was referred to the Judiciary Committee and left for dead. In February of the following year, Davis added a a similar amendment to the reauthorization of the House Higher Education Act allowing private loans to be discharged after five years in bankruptcy. It was also voted down by a 236-179 margin. (Reps. Melissa Bean, Judy Biggert, Mark Kirk, Don Manzullo, Peter Roskam, and John Skimkus all voted against it.)

Why would lawmakers reject simple measures to help students, even as the cost of a college education is rapidly accelerating? A December 2006 internal strategy document (PDF) from private lending giant Sallie Mae -- uncovered by the Chronicle of Higher Education in 2007 -- may hold the answers. Outlining the company’s goals in lobbying the 110th Congress, Sallie Mae listed preserving the special bankruptcy status as their second highest priority, right behind ensuring that the government subsidies lenders receive on federal student loans aren't taken away. Since 2007, Sallie Mae alone has spent over $8 million on campaign contributions to make sure their interests are protected. Other lenders have chipped in their fair share too.

But as we mentioned, Durbin and Davis aren't giving up the fight.  From that USA Today article:

Sen. Dick Durbin, D-Ill., says he plans to re-introduce a bill that stayed in the Judiciary Committee last year. It would turn back the 2005 change in bankruptcy law and allow private student loans to be discharged.

"The sky-high interest rates on private loans combined with questionable practices by lenders and the exponential growth of the private student loan market over the past decade have resulted in mountains of debt that can follow students from graduation to the grave," Durbin says.

Rep. Danny Davis, D-Ill., also plans to keep pushing for a change in the bankruptcy law. He introduced a bill that was voted down last year.

"I think the purpose of bankruptcy is to provide some sense of release for people when they've gotten totally overwhelmed," he says. "It's difficult for me to understand why we can't treat student loans the way we treat some other indebtedness."

That's a great question.