Student Loans and Bankruptcy: What the Law Actually Says

Michael Lux Bankruptcy, Best Of, Blog, Student Loans 9 Comments

There seems to be two prevailing notions among borrowers when it comes to student loans and bankruptcy.  The first is that student loans work just like credit cards, if you get too far over your head you can declare bankruptcy and get a fresh start.  The second is that it is impossible to discharge student loan debt through bankruptcy.  The reality is that neither is right.

The law in the vast majority of states makes it very difficult, but not impossible, for student loans to be discharged in bankruptcy.  (If you are interested in reading the seminal case on student loan bankruptcy it is Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987).

The bankruptcy court will require the debtor to prove:

1) That the debtor cannot maintain, based on current income and expenses, a minimal standard of living for the debtor and dependents if forced to pay off student loans;

2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

3) that the debtor has made good faith efforts to repay the loans.

The remaining states (Arkansas, Iowa, Maine, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, North Dakota, Rhode Island, and South Dakota) use what is called the totality of the circumstances test.  The rule states that, “reviewing courts must consider the debtor’s past, present, and reasonably reliable future financial resources, the debtor’s reasonable and necessary living expenses, and ‘any other relevant facts and circumstances.’ The debtor has the burden of proving undue hardship by a preponderance of the evidence. The burden is rigorous. ‘Simply put, if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living – then the debt should not be discharged.’” Educational Credit Management Corp. v. Jesperson, 571 F.3d 775, 779 (8th Cir. 2009).

If you feel that your situation meets the strict standards described here, you will want to contact an attorney to help you.  Obviously, if your financial situation is so dire that you believe you qualify to have your loans discharged paying for an attorney will be difficult.  It will also be difficult finding someone with past success getting student loans discharged.  However, it is definitely worth spending some time reaching out to professionals who can help, and attorneys in this field will have experience working out payment with people in similar situations.

Remember, your lender will fight hard to prevent your loans from going away.  They have attorneys who fight student loan discharge every day, and the law is on their side.

Getting rid of your student loans through bankruptcy is very difficult, but not impossible.  If you are going to attempt to go this route, the deck is definitely stacked against you, but it can be done.

If you are interested in pursuing student loan discharge through bankruptcy, you may want to read over the following resources:

If you think you have a case for a bankruptcy discharge of your student loans, check out our tips for finding a student loan attorney.


  • I’ve always been under the impression that student loans couldn’t be discharged, so thanks for the correction. I’m in Canada, so I don’t know if it differs here, but thankfully I’ve never been in such a situation to have to find out.

    • Thanks Daisy! It’s a very popular misconception, so you are definitely not alone. As for what the law says in Canada, I have no idea… but I’d be shocked if the exact same rules apply.

  • This is a very informative article. I cover the Brunner test as well on and go over each prong in detail. To my mind the most difficult element to satisfy is demonstrating additional circumstances that will persist for a significant portion of the repayment period. As repayment periods can easily last for 20 years showing an insurmountable barrier to repayment can be quite arduous, though not impossible.

    • I tend to agree with you Adam. A temporary hardship is much harder to prove than a long term one. Things like a bad economy, a temporary illness, or the like will not get it done. I imagine proving that you will not be able to earn any significant amount of money in the next 20 years is a tough one.

  • Dora

    I am a single mother thanks to a divorce of a child molesting father. I am no longer able to pay my student loans private or federal. I have a disabled son as well. My student loans are 300 a month which is half of one paycheck. I don’t know what to do. I am barely able to medicate and feed my family. I am in Utah. Can you help me figure out which is the best thing or who I can speak to?

    • Dora, I don’t personally know of any Utah based attorneys who would be able to help you out, but I would reccomend that you check out my article on finding a student loan attorney (located here: )

      Based upon what you have described, it could very well be worth your time to investigate bankruptcy options for student loans. Finding someone who specializes in this area and is willing to help isn’t always easy, so I’d suggest you take your time and be willing to make a number of phone calls.

      I wish I had better news for you, but I do wish you the best of luck.

  • Claudia Watkins

    In 1987 I went to bartendening school. Government loan of 4000.00 for a 6wk. course. I was messed up on drugs & alcohol till 2007. Anyway I’ve been sober since 2008 now . Long story short Student loan people & I made arrangements & I made payments of almost $4000. About a year ago they told my employer to stop taking money out of my check . Well, 2wks. ago they came back again & said the want the rest which is $9000 . You see I got 4000 & they jacked it up to 12,000. interest & penalties.Do you have any advice fro me. I barley have enough to pay the bills as is.

  • Marie Schalk

    I went to a for profit school known as Allied College under High tech institute owned by CHUBB they sold the school for a $1 to Anthem edu group. I owe $70k the degrees I have are worthless I will never get a job with them I was promised class credits would transfer and they dont. The so called college is now closed I have reached out to the attorney general here in MO plus MO dept of higher educ only to be told tough luck or find more info on these people so we can pursue it as consumer fraud. I have been put through so much by the people that ran that school I have depression I can go for days without sleeping only due to when I do fall asleep this just creeps in like a nightmare. I have tried to file this as consumer fraud to no avail plus filed it with the lender under false certification to benefit still they wont allow me to do that. Now with all of these for profit colleges being sued and students that went to some of them having loans forgiven. I just cant understand how these scum bags have made their billions and have never been caught. Now I want to file bankruptcy due to consumer fraud predatory loan lender mental abuse and anything else I can throw into it please help me and my friends we have not found one person that can help we are desperate for some kind of relief. thanks Marie S. Missouri

  • Craig Davidson

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