Can I File Bankruptcy on Student Loans?

For years, people believed student loans were untouchable in bankruptcy. While it’s true that discharging them has historically been nearly impossible, but recent changes by the Biden administration are giving some borrowers a real path forward. But like most things in bankruptcy, the answer is complicated and depends on your specific situation. While most people will still not qualify for relief, it is important to understand how the laws apply to your specific situation.

In this post, we’ll break down:

• The history and myths about student loan discharge in bankruptcy
• Why some of the high-profile student loan discharge stories don’t apply to most cases
• The difference between federal and private student loans
• The new attestation process from the White House for federal loans
• How bankruptcy can still help even if loans aren’t discharged

The History: Why Student Loans Are Hard to Discharge

Student loans used to be treated like most other unsecured debts in bankruptcy—but that changed in the late 1970s. Concerned about abuse of the system, Congress began limiting how and when student loans could be discharged.

Early Rules:

Originally, federal student loans were only non-dischargeable if they had been in repayment for fewer than five years, unless the borrower could prove “undue hardship.” Later, that timeline was extended to seven years. If you had been paying for that long, the loans could be wiped out without needing to prove hardship.

So even decades ago, there were two paths to student loan discharge:

1. Time-based discharge (after 5 or 7 years).
2. Hardship-based discharge, under the same “undue hardship” standard used today.

🔍 Key Insight: The undue hardship language and legal standard have not changed. It’s the same test used back then, even though time-based discharge was later removed.

The Modern Rule: No More Time-Based Discharge

In 1998, Congress eliminated the rule that allowed discharge after a certain number of years. Since then, student loans—federal and most private—can only be discharged through a hardship showing.

Then in 2005, the law expanded further, sweeping most private student loans into the same category. That means nearly all student loans today require proving “undue hardship” through an adversary proceeding in bankruptcy.

What Is “Undue Hardship”?

To discharge student loans in bankruptcy, you must prove “undue hardship.” Most courts apply the Brunner test, which requires showing that:

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

But here’s the reality:

Judges have interpreted this standard very strictly. In many cases, courts require the borrower’s situation to rise to a level of near-hopelessness—not just financial difficulty.

⚖️ Courts have ruled that merely being underemployed, struggling to make payments, failing to graduate, or being unable to find a job in your field of study does not meet the standard. Even prolonged difficulty affording your payments usually isn’t enough.

Examples of when courts have found undue hardship:

• The borrower is permanently disabled or has a chronic medical condition that limits their ability to work
• The borrower is elderly, with no meaningful chance of increasing income
• The borrower has serious caregiving responsibilities or dependents with special needs that will continue for decades to come along with limit earning potential

Even in these situations, borrowers historically needed to engage in costly, time-consuming litigation—until recent reforms began changing that process.

Why the Headlines Don’t Tell the Full Story

You may have read news stories about borrowers discharging six-figure student loan balances in bankruptcy. Some of these stories are real, but they often:

• Involve extraordinary hardship or extreme medical conditions
• Rely on unusual legal arguments or narrowly interpreted facts
• Don’t reflect what typically happens in bankruptcy court

And here’s what those headlines often leave out:

Many of the most widely circulated student loan discharge cases are later appealed—and those appellate decisions rarely make headlines. In fact:

• Some favorable rulings for borrowers are overturned on appeal
• Others are settled privately, meaning no binding legal precedent is created
• The trial court decisions don’t change the law in a way that helps future borrowers

⚠️ Bottom line: Unless Congress changes the Bankruptcy Code or the U.S. Supreme Court weighs in, there is no broad legal shift. Individual cases may offer hope—but they do not rewrite the rules.

While the legal landscape is slowly shifting in favor of borrowers, lasting change will require legislative reform or binding appellate precedent—neither of which has happened yet.

Federal vs. Private Student Loans in Bankruptcy

Not all student loans are the same. In bankruptcy, it’s important to know whether your loans are federal or private, because the rules and options differ significantly.

✅ Federal Student Loans

Include Direct Loans, Stafford Loans, PLUS Loans, and Perkins Loans. These:

• Offer income-driven repayment plans and forgiveness options (PLSF, Borrower Defense, Disability Forgiveness, etc.)
• Are now eligible for the new attestation-based discharge review process
• Are harder to discharge outside of this process without proving undue hardship

❌ Private Student Loans

Include loans from banks, credit unions, or companies like Navient or Sallie Mae. These:

• Often lack flexible repayment or forgiveness programs
• There might be some relief available, especially if:
  • You borrowed the loan to attend an unaccredited school
  • The amount borrowed exceeded the school’s cost of attendance
  • The loan was used for non-educational purposes (e.g., bar exam or medical residency)

Some private student loans may not qualify as “educational loans” under the Bankruptcy Code—meaning they can be discharged like credit cards without showing undue hardship.

The New Attestation Process (Federal Loans Only)

In 2022, the Biden administration introduced a streamlined process to make discharging federal student loans in bankruptcy more accessible. The Trump administration has not changed the program as of June 2025. NOTE: This process is not law, but a policy and process position. It can change at anytime.

Here’s how it works:

• When filing bankruptcy, a borrower also files an adversary proceeding and submits a Student Loan Attestation Form.
• The form provides detailed information on your income, expenses, health, and repayment history.
• If the facts show that repayment would cause undue hardship, the Department of Justice may recommend discharge—no trial needed.

🔍 This only applies to federal student loans. Private loans are not eligible for the attestation process.

This new process removes many of the old barriers and gives borrowers with limited income, chronic health conditions, or little chance of future improvement a real chance at relief. However, only a limited number of people will qualify for this process. You might be a good candidate, if you have had your student loans for over 10 years (in repayments status), you have made payments years of payments under an income based repayment process, you have health issues, your are not able to find a job in your degree field, etc. Talk to an experienced bankruptcy attorney about your specifics.

Can Bankruptcy Still Help If My Loans Aren’t Discharged?

Absolutely. Even if your loans remain after bankruptcy, filing can still offer major benefits:

📋 Wipe Out Other Debts

Chapter 7 or Chapter 13 bankruptcy can eliminate credit cards, medical bills, personal loans, and other obligations—freeing up money to afford your student loan payments.

❌ Pause Collections

The automatic stay stops lawsuits, wage garnishments, and collection calls—including for federal and private student loans (though only temporarily for federal loans in default).

⏳ Buy Time

Chapter 13 allows you to spread payments over 3–5 years, which may help delay aggressive collection activity while you regain financial stability. Your payment also might be substantial reduced, depending on your income, expenses, and assets. 

FAQs

Q: Can I file bankruptcy just on my student loans?
No. Bankruptcy requires you to list all debts. You can’t pick and choose only certain loans or creditors.

Q: Can I file on student loans in Chapter 13?
Yes—but to have your student loans discharged, you must file a separate lawsuit called an adversary proceeding. That said, filing Chapter 13 can still pause or reduce your loan payments for up to five years.

Q: What if I already disputed the debt on my credit report?
Disputing a student loan with the credit bureaus doesn’t affect whether the loan is valid or dischargeable in bankruptcy. These are separate legal issues.

Q: Will trying to discharge my student loans hurt my credit?
Filing bankruptcy does affect your credit temporarily, but most people see improvement within 12–24 months—especially after clearing other debts. If you are already delinquent with debts, bankruptcy might improve your credit. 

Q: What should I do first if I’m overwhelmed by student loans?
Talk to an experienced bankruptcy attorney. They can review whether your loans are federal or private, assess discharge options, and help you explore alternatives.

Final Thoughts: It’s Complicated—But There Are Options

Many people have long misunderstood how student loan discharge works in bankruptcy. While the law still makes it harder than discharging other debts, things are changing. The new attestation process, evolving case law, and deeper analysis of private loans mean that relief may be possible.

Even if you can’t discharge your student loans, filing for bankruptcy may still be the most effective way to regain control of your finances. At Ashley F. Morgan Law, PC, we help clients evaluate all their options and decide what makes the most sense based on their goals and their future.

📞 Ready to Explore Your Options?

If you’re dealing with overwhelming student loans or other debt, let’s talk. We help clients across Northern Virginia and beyond determine the best strategy for their unique situation—including whether bankruptcy might finally offer real student loan relief.

👉 Schedule a free consultation today.