Are Student Loans Dischargeable in Bankruptcy?

Student loans are dischargeable in bankruptcy, but not the way most other debts are. Credit card balances and medical bills usually vanish once your case closes; student loans stay unless you file a separate lawsuit within your bankruptcy and convince a judge that repaying them would cause you “undue hardship.” That standard has a reputation for being nearly impossible to meet, and for a long time it was. A 2025 study found that borrowers who actually pursued discharge succeeded about 87% of the time, up from roughly 40% in 2007.

Why Student Loans Get Special Treatment

Federal bankruptcy law singles out education debt as one of the few obligations that survives bankruptcy by default. Under 11 U.S.C. § 523(a)(8), loans made or guaranteed by a government entity, obligations to repay educational benefits like scholarships, and private “qualified education loans” are all exempt from the standard discharge unless the borrower proves undue hardship.¹

The statute never defines undue hardship. Federal courts have filled that gap with their own tests, and which test governs your case depends on the circuit you file in.

What “Undue Hardship” Actually Means

The Brunner Test

Most federal appellate circuits follow a framework from a 1987 Second Circuit decision, Brunner v. New York State Higher Education Services Corp. To win discharge, you have to prove all three of the following.²

First, that you can’t maintain a minimal standard of living for yourself and your dependents while making the loan payments. Judges look closely at whether you’re earning what you reasonably could and keeping expenses lean. Turning down higher-paying work or spending on non-essentials undercuts this element.

Second, that your financial situation is likely to persist for a significant part of the repayment period. A recent layoff, standing alone, rarely does it. The strongest cases involve a permanent disability, a chronic illness, advanced age with limited earning years left, or training in a field with no realistic job prospects.

Third, that you made good faith efforts to repay before seeking discharge. Courts look for payments when you could afford them, ongoing communication with your servicer, and attempts to enroll in income-driven repayment, deferment, or forbearance. Refusing to try income-driven repayment is one of the fastest ways to lose on this prong. No statute requires you to enroll first, and appellate courts have held that the availability of an income-driven plan doesn’t automatically bar discharge, but it does count against you.

The Totality of the Circumstances Test

The Eighth Circuit rejected Brunner and instead weighs the borrower’s overall situation. Most bankruptcy courts in the First Circuit apply the same broader approach, though that circuit hasn’t formally chosen a test. Rather than three rigid prongs, the judge considers income, expenses, dependents, health, age, employment prospects, and anything else that affects your ability to repay. A borrower who falls slightly short on one Brunner element might still qualify under this more flexible standard.

Private Loans May Be Easier Than You Think

Not every private student loan is protected. Section 523(a)(8) shields two categories: loans made or guaranteed by the government, and private loans that meet the Internal Revenue Code’s definition of a “qualified education loan.” A qualified education loan is one you took out solely to pay higher-education expenses at an eligible institution, within that school’s cost of attendance.¹

Private loans that fall outside that definition can be discharged like any other unsecured debt, with no hardship showing required at all. A loan may not qualify if it went toward a school that wasn’t eligible for federal aid, if the lender disbursed funds directly to you instead of to the school, if the amount exceeded the school’s cost of attendance, or if the money paid expenses unrelated to your program. If you have private loans, checking each one against the qualified-education-loan definition is worth doing before anything else. The path becomes dramatically easier if even one loan fails the test.

When private loans do qualify for protection, the litigation still plays out differently than with federal debt. Private lenders pay their own legal bills and often prefer to settle, whether by reducing the balance or modifying the terms, rather than risk losing at trial. The 2022 DOJ process described below applies only to federal loans.³

How You Actually Ask for Discharge

Discharge is available in both Chapter 7 and Chapter 13, but in either case you have to file a separate lawsuit inside your bankruptcy called an adversary proceeding. You file a complaint asking the bankruptcy judge to declare the loans dischargeable for undue hardship, the court issues a summons, and you serve every party with an interest in the debt. For federal loans, that means the loan servicer, the U.S. Attorney’s Office for your district, and the Department of Justice.⁴ For private loans, you serve the lender.

From there the case moves like other civil litigation: the defendant answers or moves to dismiss, both sides exchange documents in discovery, settlement talks happen, and if nothing resolves it, the case goes to trial. Many cases now settle before trial, especially federal-loan cases under the DOJ’s streamlined framework.

The DOJ Process for Federal Loans

In November 2022, the Department of Justice, working with the Department of Education, issued guidance that reshaped how government attorneys handle these cases. Before it, DOJ lawyers had wide discretion and often fought discharge in nearly every case. The guidance directs them to evaluate the borrower’s facts against criteria that track the Brunner elements and, when the facts support it, recommend discharge instead of litigating.³

The centerpiece is an attestation form the borrower fills out. It collects household income from all sources, monthly expenses by category (benchmarked against IRS collection standards), loan and education history, health information, employment status, and repayment efforts. The Department of Education reviews its own records alongside the attestation, and if the facts support undue hardship, the government can agree to discharge without a trial.⁵

The guidance covers only federal loans where the Department of Education is the creditor, including loans under the Federal Family Education Loan Program and Federal Perkins Loan Program that ED holds.⁶ As of early 2026, it remains listed as active on the DOJ website.⁴

You Don’t Have to Win It All

Bankruptcy judges are not stuck with an all-or-nothing choice. Several federal appellate courts recognize the authority to grant partial discharge, wiping out part of the balance while leaving the rest. The DOJ guidance explicitly contemplates this: if you can afford some payments but not the full amount, the government may recommend reducing the balance to a level your income can support over the remaining loan term.³

Courts can also leave the principal intact but modify the loan terms, lowering the interest rate, extending the repayment period, or both. Settlements with private lenders frequently take that shape. For borrowers whose situation is hard but not catastrophic, partial discharge or a term modification is a realistic outcome.

What It Costs

The filing fee for an adversary proceeding complaint is $350, but individual debtors in Chapter 7 or Chapter 13 cases have that fee waived. The real cost is legal representation. Attorneys who handle student loan adversary proceedings typically charge anywhere from a few thousand dollars for a straightforward case to $20,000 or more for a complex one that reaches trial. Some legal aid organizations take these cases for free, and the DOJ process has cut the litigation burden enough that some federal cases resolve without a full trial, which keeps fees down. For a borrower carrying six figures of student debt with strong hardship facts, the math generally works.

Evidence That Strengthens Your Case

Documentation usually decides the outcome. Vague claims about financial trouble do not carry a case; specific proof for each element does.

For the inability to maintain a minimal standard of living:

Recent pay stubs, tax returns, benefit award letters, and bank statements showing all household income
A detailed monthly budget covering housing, utilities, food, medical costs, transportation, and childcare, with receipts or bills to back it up
Birth certificates, custody orders, or other records showing who depends on your income

For the persistence of the hardship:

Medical records documenting chronic conditions, disabilities, or mental health issues that limit earning capacity
Employment records showing job loss, underemployment, or inability to find work in your field
Evidence that you didn’t complete your degree, that your field has contracted, or that your credentials are no longer marketable
Documentation of your age and career trajectory if you’re nearing retirement

For good faith efforts to repay:

Records of payments made when you could, even if sporadic
Emails, letters, or call logs showing contact with your servicer
Applications or enrollment records for income-driven repayment, deferment, or forbearance

Gathering these materials before you file saves time and strengthens your position, especially under the DOJ process, where the attestation form asks for much of this information upfront.

1
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
2
Justia. Brunner v. New York State Higher Education Services Corp
3
U.S. Department of Justice. Guidance for Department Attorneys Regarding Student Loan Bankruptcy Litigation
4
U.S. Department of Justice. Student Loan Guidance
5
U.S. Department of Justice. Student Loan Attestation Form
6
Federal Student Aid. Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings