Student Loans and Bankruptcy: Is It Worth Exploring?

For years, most people were told the same thing: “Student loans can never be discharged in bankruptcy.” That belief is not entirely true.

While the legal standard for discharging student loans remains difficult, recent changes in how the government evaluates hardship claims have created new opportunities for some borrowers to seek relief. In recent years, the Department of Justice and Department of Education issued updated guidance that may make student loan discharge through bankruptcy more accessible for some people.

That said, the threshold is still high. To discharge student loans in bankruptcy, courts generally look at whether repayment would create an undue hardship and whether your financial difficulties are likely to continue.

When Might Student Loan Discharge Be Worth Exploring?

You may want to speak with a bankruptcy attorney if several of these apply to you:

• You cannot maintain a basic standard of living while making student loan payments
• Your financial hardship is long-term, not temporary
• Medical issues, disability, age, or caregiving responsibilities limit your ability to increase income
• You have made efforts to repay or manage your loans, but still cannot make meaningful progress
• Your income and expenses show little realistic ability to pay
• You are already considering Chapter 7 or Chapter 13 bankruptcy

A Simple Way to Think About It

• Temporary hardship: student loan discharge may be difficult.
• Long-term financial struggle with little ability to improve income: it may be worth exploring.
• High income or strong future earning potential: qualification may be less likely.

Student loan discharge is still not easy, and not everyone qualifies. But many people are surprised to learn the answer is not an automatic “no.”

Wondering if your student loans may be dischargeable in bankruptcy? Contact Lever Law to discuss your options.