The Bottom Line
Student loans are not automatically discharged in bankruptcy. But they can be discharged if you file a separate lawsuit (adversary proceeding) within your bankruptcy case and prove that repayment would cause undue hardship. The 2022 DOJ guidance has significantly improved outcomes for debtors who pursue this path.
The Legal Framework: Section 523(a)(8)
Under 11 U.S.C. § 523(a)(8), student loans are excepted from discharge in bankruptcy unless the debtor can demonstrate that repaying the loans would impose an "undue hardship" on the debtor and their dependents.
This exception applies to:
- Federal student loans (Direct, FFEL, Perkins)
- Private student loans (added by BAPCPA in 2005)
- Parent PLUS loans
- Consolidation loans that included student debt
The key phrase is "undue hardship" -- and Congress never defined what it means. That job fell to the courts, which developed two competing tests.
The Two Tests for Undue Hardship
The Brunner Test (majority of circuits)
Established by Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987). Used by the 1st, 2nd, 3rd, 4th, 5th, 6th, 7th, 9th, 10th, and 11th Circuits.
Current inability to pay
Based on your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if forced to repay the loans.
Persistence of hardship
Additional circumstances exist indicating that your financial situation is likely to persist for a significant portion of the repayment period.
Good faith effort
You have made good faith efforts to repay the loans. This includes applying for income-driven repayment plans, deferments, or forbearances.
Totality of the Circumstances Test (8th Circuit and others)
Used by the 8th Circuit and gaining traction in other courts. More flexible than Brunner.
Holistic evaluation
The court considers all relevant factors -- income, expenses, age, health, employment history, dependents, loan amount, and any other circumstances -- without requiring the debtor to satisfy rigid prongs. The question is simply whether repayment would constitute undue hardship under the totality of the debtor's circumstances.
Which test applies to you? It depends on which federal circuit your bankruptcy court is in. The 8th Circuit (covering Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) uses the more debtor-friendly totality test. Most other circuits use the stricter Brunner test -- but even Brunner courts are applying it more flexibly after the 2022 DOJ guidance.
The 2022 DOJ Guidance: A Game Changer
In November 2022, the Department of Justice and the Department of Education issued joint guidance that fundamentally changed how the federal government handles student loan discharge cases in bankruptcy.
What Changed
- New attestation process: Debtors complete a form detailing their financial circumstances. The DOJ reviews it using a standardized framework.
- Presumption of discharge: If the analysis supports discharge, the DOJ recommends it to the court instead of fighting it.
- No more reflexive opposition: Previously, DOJ attorneys opposed almost every student loan discharge. The new guidance directs them to evaluate each case on its merits.
- Partial discharge: The guidance allows for recommending partial discharge where full discharge isn't warranted.
The impact has been immediate. In the first year after the guidance, the DOJ recommended discharge or partial discharge in a significant majority of cases evaluated under the new framework. This does not guarantee the court will grant discharge -- the judge still decides -- but having the DOJ on your side instead of opposing you is a dramatic shift.
How to Pursue Student Loan Discharge
Step 1: File bankruptcy (Chapter 7 or Chapter 13)
Student loan discharge requires an active bankruptcy case. You can pursue it in either chapter. Chapter 7 is faster overall; Chapter 13 lets you make reduced payments during the plan while the adversary proceeding is pending.
Step 2: File an adversary proceeding
This is a separate lawsuit within your bankruptcy case, filed as a complaint against your student loan lender(s). Filing fee: $350. You (or your attorney) must prepare a complaint alleging undue hardship under Section 523(a) nondischargeable debts(a)(8).
Step 3: Complete the DOJ attestation form (federal loans)
If your loans are federal, complete the attestation form from the DOJ guidance. This provides the DOJ with the information it needs to evaluate your case under the new framework. Your attorney should help you with this.
Step 4: Litigation or settlement
The lender (or DOJ for federal loans) responds. If the DOJ recommends discharge, the court typically grants it. If the lender contests, the case proceeds to trial. Many cases settle with partial discharge or modified repayment terms.
Step 5: Court decision
The bankruptcy judge decides whether you've demonstrated undue hardship. The court can grant full discharge, partial discharge, or deny the request. The decision can be appealed.
What Strengthens Your Case
| Factor | Impact |
|---|---|
| Disability or chronic illness | Strongly supports discharge |
| Age (near or past retirement) | Supports persistence prong |
| Low income relative to loan balance | Supports inability to pay |
| Applied for income-driven repayment | Shows good faith |
| Degree did not lead to employment | Supports hardship |
| Caring for dependents | Increases expenses, supports hardship |
| Made some payments before filing | Shows good faith effort |
| High income with manageable debt | Weakens case |
| Never applied for IDR plans | May hurt good faith prong |
| Recently incurred the debt | Courts may view skeptically |
Federal vs. Private Student Loans
| Feature | Federal Loans | Private Loans |
|---|---|---|
| Undue hardship required? | Yes | Yes (since BAPCPA 2005) |
| DOJ attestation process? | Yes -- new framework | No -- lender decides whether to contest |
| Income-driven repayment available? | Yes (IBR, PAYE, SAVE) | No (lender discretion only) |
| Public Service Loan Forgiveness? | Yes (after 10 years) | No |
| Typical litigation difficulty | Moderate (with DOJ guidance) | Higher (lenders more likely to contest) |
Private student loans may be easier to discharge in some cases -- particularly if the loan does not meet the statutory definition of a "qualified education loan" (e.g., loans that exceeded the cost of attendance, loans for non-accredited programs, or loans to non-enrolled students). Some courts have found that these loans are not protected by Section 523(a)(8) at all, making them dischargeable like any other unsecured debt.
Costs of Pursuing Student Loan Discharge
| Cost Item | Amount |
|---|---|
| Adversary proceeding filing fee | $350 |
| Attorney fees (adversary proceeding) | $1,500 - $5,000+ |
| Bankruptcy filing fee (Ch.7 / Ch.13) | $338 / $313 |
| Bankruptcy attorney fees | $1,000-$5,000 (varies by chapter) |
Some bankruptcy attorneys include adversary proceeding work in their base fee; most charge separately. Legal aid organizations and law school clinics may handle student loan adversary proceedings at no cost. The DOJ attestation process itself has no fee.
Who Should Consider Student Loan Discharge
Discharging student loans in bankruptcy is not for everyone, but certain borrowers are in a strong position to succeed under the current legal landscape.
- Borrowers with disabilities or chronic illness: Medical conditions that limit your ability to work are among the strongest factors courts consider. If your condition is documented and likely to persist, you have a strong case under both the Brunner test and the totality of the circumstances test.
- Older borrowers approaching retirement: If you are in your 50s or 60s with student debt (including Parent PLUS loans), courts recognize that your earning years are limited. Fixed or declining income strongly supports the persistence prong.
- Borrowers whose degrees did not lead to employment: If you completed a program that did not improve your earning capacity -- or if you never completed the degree at all -- this supports your hardship argument.
- Borrowers with private loans from non-accredited schools: If your private student loans were for a program at a non-accredited institution or exceeded the cost of attendance, those loans may be dischargeable without proving hardship at all.
- Borrowers who have already tried IDR: A history of income-driven repayment enrollment demonstrates good faith and strengthens your case under the Brunner test. If your IDR payment has been $0 for years, that itself is evidence of your inability to pay.
Alternatives to Discharge
If discharge through bankruptcy is not feasible or desirable, consider these alternatives for federal student loans:
- Income-Driven Repayment (IDR): Plans like SAVE, IBR, and PAYE cap monthly payments at a percentage of discretionary income. Payments can be as low as $0/month. Remaining balance is forgiven after 20-25 years.
- Public Service Loan Forgiveness (PSLF): 120 qualifying payments while working for a government or nonprofit employer. Remaining balance forgiven tax-free.
- Total and Permanent Disability (TPD) Discharge: If you are totally and permanently disabled, your federal loans can be discharged outside of bankruptcy.
- Closed School Discharge: If your school closed while you were enrolled or shortly after withdrawal.
- Borrower Defense to Repayment: If your school engaged in certain misconduct (fraud, misrepresentation).
These alternatives and bankruptcy are not mutually exclusive. You can enroll in IDR now and pursue discharge later. In fact, enrolling in IDR before filing for bankruptcy strengthens your case by demonstrating good faith under the Brunner test.
Frequently Asked Questions
About This Resource
This site provides educational information about student loan discharge in bankruptcy. The legal landscape in this area is evolving rapidly. Case law varies significantly by circuit and district. This is not legal advice -- consult a bankruptcy attorney experienced in student loan adversary proceedings for guidance on your specific situation.
Part of the Bankruptcy Transparency Network