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Can You Discharge Student Loans in Bankruptcy? The Complete §523 Guide

You have probably been told the same thing for years: student loans are the one debt bankruptcy can never touch. Servicers said it. Maybe a lawyer said it.

It is not true — and it has not been true for a while. Here is what the law actually says, what changed in November 2022, and what the government's own data shows.

The Short Answer: Yes — and the Odds Changed in 2022

Student loans have always been legally dischargeable if repaying them would cause "undue hardship." The problem was never the statute. The problem was that proving undue hardship was expensive, unpredictable, and aggressively contested, so almost nobody tried. From 2011 to 2019, more than 99.8% of borrowers who filed bankruptcy did not get their student loans discharged, according to a letter from Senator Elizabeth Warren's office to the U.S. Trustee Program.

On November 17, 2022, the Justice Department, with the Department of Education, issued new Guidance for Department Attorneys Regarding Student Loan Bankruptcy Litigation. It did not change the statute. It changed the behavior of the government lawyers on the other side — which is what was actually blocking borrowers.

The results are not subtle. In July 2024, DOJ and the Department of Education announced that of cases decided by courts from November 2022 through March 2024, 98% provided relief through full or partial discharge.

The bar is not extreme poverty. It is a defined financial test, applied consistently, by attorneys instructed to say yes when the numbers line up.

What §523(a)(8) Actually Says

Section 523 lists debts that survive a bankruptcy discharge. Paragraph (a)(8) covers education debt, as codified at 11 U.S.C. § 523:

"(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for— (A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or (B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual"

Two things matter enormously.

The "unless" clause comes first. Undue hardship is not an exception carved into an absolute ban — it is a condition built into the exception. If undue hardship exists, the debt is dischargeable.

The statute protects only three categories. Subsection (A)(i) covers government-backed and nonprofit-funded loans, where virtually all federal loans live. (A)(ii) covers obligations to repay "funds received as an educational benefit, scholarship, or stipend." (B) covers "qualified education loans" as defined by the tax code — where most private loans are supposed to fall. A debt that fits none of those buckets is dischargeable in the ordinary course, with no hardship showing at all. That turns out to matter enormously for private loans.

The Brunner Test: Three Prongs

Congress never defined "undue hardship." The dominant judicial framework comes from Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987). A borrower must prove all three prongs — see our undue hardship checklist for the documents each one needs.

Prong 1 — Present inability to maintain a minimal standard of living

You cannot maintain a minimal standard of living for yourself and your dependents, on current income and expenses, while repaying the loan.

This is no longer a vibes test. Under the DOJ guidance, government attorneys use the IRS Collection Financial Standards — National Standards for food, housekeeping supplies, apparel, personal care, and miscellaneous; Local Standards for housing, utilities, and transportation; plus Other Necessary Expenses like court-ordered support, childcare, and preschool — then compare allowable expenses against household gross income. In the guidance's words: "If the debtor's allowable expenses exceed their gross income, this element of the analysis is satisfied."

Notably, the guidance counts reasonable expenses you are not currently paying because you cannot afford them — staying with family, overcrowded housing, skipping childcare or healthcare — because "a simple comparison of present expenses and income could unduly assess the debtor's financial situation against a standard that is below a minimal standard of living."

Prong 2 — The hardship is likely to persist

Historically the killer prong: courts demanded something near a "certainty of hopelessness." The guidance replaced that fog with five rebuttable presumptions. Persistence is presumed if any one applies:

1. You are age 65 or older
2. You have a disability or chronic injury impacting income potential
3. You have been unemployed at least five of the last ten years
4. You did not obtain the degree the loan was taken out for
5. The loan has been in payment status — anything other than "in-school" — for at least ten years

For disability, "the presumption may be applied even in the absence of a formal medical opinion." For consolidation loans, time in repayment on the underlying loans counts. Rebuttal requires concrete facts; "mere conjecture about the borrower's future ability is not enough."

Prong 3 — Past good faith efforts to repay

Good faith is established, absent countervailing circumstances, by any one of: making a payment; applying for deferment or forbearance (other than in-school or grace period); applying for an income-driven repayment plan; applying for a federal consolidation loan; responding to servicer outreach; or engaging meaningfully with the Department of Education or a servicer about options.

Never enrolling in an IDR plan does not by itself show bad faith — the guidance acknowledges IDR plans "have not always been administered effectively or accessibly." The COVID-era automatic forbearance period, March 2020 through December 2022, cannot be held against you. And the inquiry "should not be used as a means for courts" or Department attorneys "to impose their own values on a debtor's life choices." What does defeat good faith: contriving a hardship, abusing the loan system, or fraud in obtaining the loans.

The Totality of the Circumstances Test

Not every circuit uses Brunner. The Eighth and Ninth Circuits apply a more flexible "totality of the circumstances" standard from Long v. Educational Credit Management Corp. (In re Long), 322 F.3d 549 (8th Cir. 2003), weighing (1) past, present, and reasonably reliable future financial resources; (2) reasonably necessary living expenses of the debtor and dependents; and (3) any other relevant facts and circumstances. The core question is whether reasonable future resources will cover the debt while still allowing a minimal standard of living. There is no rigid gate — weakness on one factor can be offset by strength on another. The DOJ guidance applies in these jurisdictions too, so the same attestation process works.

What the November 2022 Guidance Changed

The guidance did not amend the Code and does not bind judges. It rewired the government's litigating position.

Before it, a borrower faced a government lawyer whose default posture was to contest and litigate. Every case was bespoke; outcomes varied wildly by district. Now, Department attorneys are directed to stipulate to the facts establishing undue hardship and recommend discharge when three conditions are met: the debtor presently lacks ability to repay; that inability is likely to persist; and the debtor acted in good faith in attempting to repay.

The mechanism is a standardized, roughly 15-page Attestation Form, sworn under penalty of perjury, covering income, expenses, future circumstances, past repayment efforts, and assets. The U.S. Trustee Program publishes the guidance and form as Appendix A; the current version is dated 05/2025, a refinement that leaves the framework intact, and the November 2022 guidance remains in effect. The form goes to the Assistant U.S. Attorney handling the case — not onto the court docket unless directed.

Three details worth knowing: partial discharge is a real outcome when you can pay something but not a full standard payment; your home and retirement are largely protected, since requests to liquidate them "should be exceptionally rare"; and the comparison payment is the standard repayment amount, not a low income-driven payment — which makes the math considerably more favorable.

The 98% Number, In Context

From the July 2024 DOJ and Education announcement:

Metric	Figure
Decided cases resulting in full or partial discharge (Nov. 2022 – Mar. 2024)	98%
Total cases filed under the process	1,220
New cases filed Oct. 2023 – Mar. 2024	588 (36% increase over prior six months)
Borrowers voluntarily using the streamlined process	96%

Read that carefully. It is not "98% of borrowers get relief" — it is 98% of cases filed and decided under this process. The filter that matters is the front end: whether your financial picture fits before you file. That is exactly why a real eligibility screen beats optimism. Independent research points the same way: a study by Professor Jason Iuliano in the American Bankruptcy Law Journal found borrowers seeking federal loan discharge in 2023 succeeded 87% of the time, as reported by CNBC Select.

Who Qualifies

There is no income cutoff, and it is worth checking your own numbers rather than assuming either way. The test is relational: allowable expenses versus household gross income. Strong indicators you should get screened:

• Allowable IRS-standard expenses meet or exceed household gross income
• Age 65+, or a disability or chronic condition affecting earning capacity
• Unemployed five or more of the last ten years
• You never finished the degree the loans paid for
• Loans in repayment status — including forbearance, deferment, or default — for ten years or more
• Supporting dependents on a single modest income

Loan types: the attestation process covers federal loans held by the Department of Education, principally Direct Loans and Direct Consolidation Loans. Commercially held FFEL loans generally must be consolidated into a Direct Consolidation Loan before filing. What does not help: comfortable discretionary income. The guidance is blunt — if "the debtor has sufficient discretionary income to make full student loan payments as required under their loan agreement, the debtor has not satisfied the test for undue hardship."

Federal vs. Private Loans: Two Different Roads

Private loans take a different path — and sometimes an easier one. For a private loan to be protected at all, the creditor must fit it into a §523(a)(8) category. Courts have repeatedly held many do not.

In McDaniel v. Navient Solutions, LLC, No. 18-1445 (10th Cir. Aug. 31, 2020), the Tenth Circuit held that a private educational loan is not "an obligation to repay funds received as an educational benefit" under §523(a)(8)(A)(ii). Reading it otherwise would collapse the distinction Congress drew between a "loan" in clause (i) and "funds received as an educational benefit" in clause (ii). The court joined the Fifth Circuit in that reading, as Michael Best & Friedrich noted.

That leaves subsection (B), which protects "qualified education loans" under IRC § 221(d)(1) — and § 221(d) requires the debt to have been incurred solely to pay qualified higher education expenses, which are capped by the student's cost of attendance less other aid. Translation: a private loan exceeding what school actually cost may never have been protected in the first place.

Cuvelier v. MOHELA — What It Does and Does Not Hold

That limit is at the center of Cuvelier v. MOHELA, Adv. No. 25-2009 (Bankr. S.D. Tex.), decided by Judge Marvin Isgur on May 27, 2026, per the opinion as reported on CaseMine.

The debtor attended the Academy of Art University in 2006 with three private Navient loans. One, for $16,849, was at issue. It was disbursed to the school's financial aid office, and the university then refunded $4,671 to the debtor, who bought photography equipment required for her curriculum. After she completed a Chapter 13 plan and received a discharge in December 2024, Navient sent a billing statement. She sued, arguing the loan was never a "qualified education loan" under §523(a)(8)(B), and sought sanctions.

The court denied summary judgment to both sides. Judge Isgur held that a genuine dispute of material fact remains over the proper cost-of-attendance calculation and whether the proceeds exceeded her qualified higher education expenses — which determines whether §523(a)(8)(B) applied at all. That question goes to trial. Per a detailed case analysis, the court noted that executed loan documents and school certifications ordinarily establish educational purpose, but contrary evidence like the refund check can create a factual dispute. The court also rejected the sanctions request, applying Taggart v. Lorenzen and finding the law unsettled enough to give Navient a "fair ground of doubt."

Do not read Cuvelier as holding that over-cost-of-attendance private loans are dischargeable. It is not that. It is a ruling that the question is factual, live, and worth trying — a door opening, not a door walked through.

The Process, Step by Step

1. File the bankruptcy case — Chapter 7 or 13. Student loans are not discharged automatically; the general discharge does not reach §523(a)(8) debt.
2. File an adversary proceeding — a separate lawsuit inside your case seeking a dischargeability determination. Under Bankruptcy Rule 4007(b), it may be filed at any time, including by reopening a closed case. (You can file this yourself, but most people are outmatched litigating it alone.)
3. Submit the attestation — the Assistant U.S. Attorney provides the form; you complete it under penalty of perjury with supporting documentation and return it to the AUSA.
4. The government reviews — DOJ, coordinating with Education, applies the three-condition framework and, if met, stipulates to undue hardship and recommends full or partial discharge.
5. The court rules — the judge enters judgment; the DOJ recommendation is not binding, but courts overwhelmingly approve stipulated discharges, which is what produces the 98% figure.

What It Costs

Item	Cost
Chapter 7 court filing fee	$338 ($245 filing + $78 administrative + $15 trustee surcharge)
Chapter 13 court filing fee	$313
Adversary filing fee when the debtor is plaintiff	$0 — waived
LoanFree.AI case preparation services fee	$249 flat
Traditional attorney-only route	~$1,500 – $5,000+

The $338 Chapter 7 fee is national and has been in place since December 1, 2023, per the Bankruptcy Court Miscellaneous Fee Schedule and confirmed by courts including the Eastern District of Louisiana. Filers below 150% of the federal poverty line who cannot pay in installments may seek a waiver on Official Form 103B.

The adversary complaint normally costs $350 — but the fee schedule expressly provides it "must not be charged if… the debtor is the plaintiff." In a student loan dischargeability action, the debtor is the plaintiff. That fee is zero.

Wondering how that $249 stacks up against other options? See how LoanFree.AI compares to Upsolve, Tate Law, and Debt.org.

Five Myths, Corrected

"Student loans can never be discharged." False, provably. The statute has always allowed hardship discharge, and 98% of decided cases since November 2022 produced full or partial relief.

"You need extreme poverty." False. The old "certainty of hopelessness" gloss is not what DOJ uses. The test is arithmetic — IRS-standard allowable expenses versus household gross income — plus one of five defined presumptions and a good-faith bar a single deferment application can clear.

"It ruins your credit forever." Misattributed cause. The credit impact comes from the bankruptcy filing itself, not the student loan discharge inside it. Chapter 7 stays on a report up to 10 years and Chapter 13 up to 7, whether or not you pursue the loans. If you are filing anyway, leaving the loans undischarged means you take the credit hit and keep the debt.

"Private loans are hopeless." Often the opposite. Private loans must squeeze into (A)(ii) or (B) to be protected at all. McDaniel closed off (A)(ii) in the Tenth and Fifth Circuits, and the cost-of-attendance limit in (B) is being actively tested.

"You must sell your house and drain your retirement first." False. DOJ guidance says such liquidation requests "should be exceptionally rare" and directs attorneys not to give dispositive weight to assets critical to a debtor's well-being.

Find Out Where You Stand — Free

The most expensive mistake in this area is assuming you do not qualify and never checking.

LoanFree.AI runs your numbers against the same framework DOJ attorneys use — IRS Collection Financial Standards, the five persistence presumptions, the good-faith factors, and loan-type analysis for federal and private debt — and tells you honestly whether your case fits before you spend a dollar.

Check your eligibility free at loanfree.ai/apply. No cost, no obligation. If your case qualifies, preparation is a $249 flat services fee, with attorney matching where representation is needed.

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Legal Disclaimer

This article is provided for general informational and educational purposes only and does not constitute legal, financial, or tax advice. LoanFree.AI is not a law firm and does not provide legal representation; it provides case preparation services and attorney matching. Reading this article, submitting an eligibility screening, or using LoanFree.AI's services does not create an attorney-client relationship. Bankruptcy law, the interpretation of 11 U.S.C. § 523(a)(8), and Department of Justice policy are subject to change, and outcomes vary based on individual circumstances, the controlling law of your federal circuit, and the discretion of the presiding bankruptcy judge. Statistics cited reflect outcomes in previously decided cases and are not a prediction or guarantee of any particular result. Cuvelier v. MOHELA remains pending, and no final judgment on dischargeability has been entered in that case. Consult a licensed attorney in your jurisdiction before making decisions about bankruptcy or your student loans.