Can Student Loans Be Discharged in Bankruptcy?

For years, many people believed student loans could never be discharged in bankruptcy. That is not true, but the process is different from other debts.

The legal rule

Under 11 U.S.C. 523(a)(8), student loans made, insured or guaranteed by the government, loans from nonprofit programs, and qualified education loans are not discharged unless excepting them "would impose an undue hardship on the debtor and the debtor's dependents."

Undue hardship

Most courts use a three-part test (often called the Brunner test) asking whether:

1. You cannot maintain a minimal standard of living if forced to repay
2. Your situation is likely to persist for a significant part of the repayment period
3. You made good-faith efforts to repay

Some courts use a "totality of the circumstances" test instead.

The adversary proceeding

You must file a separate complaint within your bankruptcy case, which is a lawsuit against the lender or the Department of Education. Partial discharge is possible in some courts.

The federal attestation process

Since November 2022, the Justice Department and Education Department have used a process in which borrowers complete an attestation form describing their finances and repayment history. Government attorneys then evaluate it and may recommend full or partial discharge rather than contest the case (ABI; Tate Law). Reports indicate many more federal borrowers have received relief through this process than under the old approach. Confirm current procedures, since policies can change.

Private student loans

• Qualified education loans (as defined in the tax code) require an undue hardship showing.
• Non-qualified private loans, such as loans for unaccredited programs or amounts above the cost of attendance, may be dischargeable like ordinary unsecured debt (Tate Law).

Alternatives for federal loans

Income-driven repayment plans, Public Service Loan Forgiveness, total and permanent disability discharge, and closed school or borrower defense discharges may be faster routes (Federal Student Aid). Repayment options changed under the 2025 budget law, so check studentaid.gov.

Chapter 13

Chapter 13 can provide breathing room, but student loans still generally require an undue hardship ruling to be discharged.

Talk to a bankruptcy lawyer who handles student loan adversary proceedings.

Sources

1. Cornell Law School LII: 11 U.S.C. 523(a)(8), Exceptions to discharge, educational loans
2. Federal Student Aid: Discharge in bankruptcy
3. Tate Law: Can you file bankruptcy on student loans?
4. American Bankruptcy Institute: DOJ guidance on evaluating federal student loan discharge requests