Bankruptcy and Student Loans: What You Need to Know in 2025

For decades, student loans were considered virtually impossible to discharge in bankruptcy. The legal standard — "undue hardship" — was interpreted so narrowly by most courts that fewer than 0.1 percent of bankruptcy filers even attempted to discharge their student loans. That landscape is changing rapidly.

The 2025 Data: An 87% Success Rate

A study published in December 2025 and reported by CNBC found that the success rate for student loan borrowers who pursue discharge in bankruptcy has jumped to 87 percent — a dramatic increase from historical rates.¹ The study attributed this shift primarily to a November 2022 policy change by the U.S. Department of Justice and the Department of Education, which created a new attestation-based process for evaluating student loan discharge requests.

The Legal Standard: Undue Hardship

Under 11 U.S.C. § 523(a)(8), student loans — both federal and most private — are not automatically dischargeable in bankruptcy. To discharge them, you must file a separate adversary proceeding and prove "undue hardship." Most courts apply the Brunner test, which requires you to demonstrate:

1. Poverty: Based on current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if forced to repay the loans.
2. Persistence: Your financial situation is likely to persist for a significant portion of the repayment period.
3. Good faith: You have made good faith efforts to repay the loans (e.g., applied for income-driven repayment, sought deferment or forbearance).

Some circuits use the "totality of circumstances" test instead of Brunner, which is generally considered more flexible and borrower-friendly.

The 2022 DOJ Policy Change: The Attestation Process

In November 2022, the DOJ and Department of Education issued new guidance creating a structured attestation process for evaluating student loan discharge requests. Under this process, the government reviews a standardized form submitted by the debtor covering income, expenses, disability, and repayment history — and makes a recommendation to the court based on objective criteria rather than adversarial litigation.

A February 2026 analysis published in the Kentucky Law Journal found that this process has made discharge "effective but underutilized" — the success rate is high for those who pursue it, but most eligible borrowers still do not attempt discharge because they are unaware the option exists.²

Who Is Most Likely to Qualify?

Based on the DOJ's published criteria and court decisions, borrowers most likely to succeed in a discharge attempt include:

• Those with permanent disabilities that prevent full-time employment
• Older borrowers (55+) with limited remaining earning years
• Borrowers who attended for-profit schools that closed or committed fraud
• Those who never completed a degree and have limited earning potential
• Borrowers with income consistently below 150% of the federal poverty line
• Those who have been in repayment for 10+ years with no meaningful progress on the balance

Private Student Loans: A Different Analysis

Private student loans may be easier to discharge than federal loans in some circumstances. Courts have discharged private loans where:

• The loan was used for expenses not covered by the school's cost of attendance (and thus may not qualify as an "educational benefit" under § 523(a)(8))
• The loan was made to a student who was not enrolled at least half-time
• The loan was made to attend a school not eligible for federal student aid

The Brunner or totality test still applies, but the threshold question of whether the loan is even covered by § 523(a)(8) is worth examining with an attorney.

Chapter 13 as an Alternative

Even if you cannot fully discharge student loans, Chapter 13 can provide significant relief by:

• Allowing you to pay a reduced amount toward student loans over the 3–5 year plan period
• Freeing up cash flow by discharging other unsecured debts (credit cards, medical bills), making student loan payments more manageable
• Providing the automatic stay protection that halts any collection activity on student loans during the plan period

Next Steps

Student loan discharge in bankruptcy is a specialized area of law. If you believe you may qualify, seek out a bankruptcy attorney with specific experience in adversary proceedings and student loan discharge.

Find a bankruptcy attorney experienced in student loan discharge →