How Hard is It to Discharge Student Loans in Bankruptcy?

by Shawanda Greene

Earlier this year, the United States’ collective student loan bill topped $1 trillion.

Amazingly, only about 30% of those over the age of 25 hold a bachelor’s degree or higher. Even more startling, 40% of college freshman fail to finish a four-year degree in—wait for it—six years!

For the most part, I believe an educated populace provides great economic benefits to the nation.

However, the neck-breaking pace at which we’re racking up student loans concerns me.

Unlike many Americans, I don’t view a college degree as a magic bullet to success, particularly if you borrow money for higher education that doesn’t lead to a job that affords you the ability to repay your debt.

You see, student loans—federal AND private—are practically impossible to discharge in bankruptcy.

Dare to default on a student loan backed by the taxpayers and, without even hauling your broke butt into court, Uncle Sam can

  • Seize your tax refund
  • Garnish your wages,
  • Siphon money out of your bank account,
  • Usurp up to 15% of Social Security retirement and disability benefits
  • Slap a lien on your property, or
  • Engage in any other gestapo-like tactics to recoup borrowed funds.

Private lenders employ more civil measures to shake down deadbeats. But since bankruptcy laws make it difficult to shirk student loan obligations, at some point during your life, you’ll probably pony up the dough you owe.

Private student loans should wash away in bankruptcy as easily as credit card, auto, and personal loans.

Maybe then, banks would exercise more diligence before forking over tens (or hundreds) of thousands of dollars to youngsters who don’t know how to properly wash, dry, and fold a load of laundry, let alone evaluate their ability to repay a massive amount of debt.

Alas, whether public or private, the only way to shake student loan debt is by paying it.

So how tough is it to bankrupt student loans?

As the infographic below shows . . . real tough.

Can Claiming Bankruptcy Discharge Student Loan Debt?
From: OnlineColleges.net

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{ 27 comments… read them below or add one }

Thomas S. Moore November 6, 2012 at 3:41 PM

From what I understood a few years ago Student Loans is one of those things that you will HAVE TO PAY eventually. They have been trying to get this included as a part of filing bankruptcy but hasn’t worked out much.
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Shawanda Greene November 6, 2012 at 4:21 PM

Yep. The only way to get rid of student loans for most people is to repay them or die. And even then, death erases federal student loans only. For years, I’ve been looking for some super secret trick on how to weasel out of paying back private student loans that I can pass on to my readers. Haven’t found anything yet.
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Dominique Brown November 10, 2012 at 6:00 AM

The only way I know that you can get rid of student loans is through the process of Permanent Disability Discharge, in which individuals get assistance in paying off the amount of their education loan. However, there is a strict guideline as to who can take advantage of this cancellation.
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Kelly@FinancialFixers November 9, 2012 at 1:57 PM

What you said is one of the most important things to remember- a college degree doesn’t guarantee you a job after college or ever one that will allow you to pay off the debt you acquired over the course of your schooling. Pretty scary stuff here.
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Shawanda Greene November 9, 2012 at 2:06 PM

Yeah it is. I only recently learned that lenders can garnish up to 15% of Social Security retirement benefits to satisfy student loan obligations. The sad thing is the cosignor, i.e., grandma, is the one who’s getting hurt.
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Johnny@ Financial Freedom November 9, 2012 at 4:31 PM

Sadly, there are no guarantees. And student loans are ridiculously easy to attain. Just like credit cards. I don’t remember exactly, but it felt like I just filled out a form and boom, I had $10,000 for college. So it also goes back to financial education at as young an age as possible.
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101 Centavos November 11, 2012 at 9:41 PM

All the more reasons not to get a student loan in the first place… or kill it as soon as possible.


1 Step January 9, 2013 at 8:30 PM

I am deep in grad school debt and it will take me some time to dig out of it. Hopefully the end will yield a good outcome, though it’s hard to say that right now.


kathryn February 5, 2013 at 2:29 AM

Really, the problem is many students don’t think of it as money. They should be living as cheaply as they can, but they don’t. They think they all deserve to live by themselves, which is fine, but don’t complain when the repayments start. There are ways of living for free, and not only for students.
Rent an apartment with 3 bedrooms and a den. The rent is $900 which includes utilities. You have some options here.
Rent the rooms for $450 or take in boarders at $600 room, and include breakfast and supper Mon-Fri.Breakfast can be simple as make your own toast/cereal/muffins. Suppers can be pasta dishes, stews,soups, chilis, hotdogs, rice and curries,roast w/veggies.
Groceries are cheap when purchased in bulk.Breads/muffins are easily homemade or bought reduced. Make homemade waffles/pancakes to heat up in the toaster. Pot of homemade porridge with apples and cinnamon.
This way you will eat for free too.
Weekends they can fend for themsleves. You take the den as your private bedroom. You make the rules, as they are your boarders, not roommates.


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Lindsay Lee December 26, 2014 at 4:43 AM

Student loans are difficult, but not impossible, to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.”Courts use different tests to evaluate whether a particular borrower has shown an undue hardship.


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