Can you discharge a private student loan in bankruptcy? What can be done about my federal student loans in bankruptcy?

As you can imagine, I get asked this question a lot. It is being asked more often since student loan debt now is now higher than total credit card debt, according to the Wall Street Journal.

In general, private student loans and federal student loans cannot be discharged in bankruptcy. But I have blogged in the past that there may be exceptions to the rule.

But since the issue comes up quite often, I figured it would be helpful to show a history of student loan debt and its treatment in bankruptcy.

From a Congressional report in 2007:

  • Both types of student loan debt were dischargeable prior to 1976
  • In 1976, federal student loans were addressed: they become non-dischargeable until at least 5 years had lapsed from the beginning of a repayment period.
  • In 1990, this period was extended to 7 years.
  • In 1998, the 7 year rule was removed and federal student loans became completely non-dischargeable.
  • In 2005, private student loans became non-dischargeable as well.

The next question people ask is if the student loans can be discharged based upon a disability. The answer is almost always no. It is extremely hard to prove that one is disabled to the point that no payment needs be made on student loans.

One can look to government websites to determine if there is any basis for an administrative discharge of student loans. Also, there are certain guidelines for the possibility of a repayment plan that may be more affordable.

One other option would be for you to consider using a chapter 13 bankruptcy to get your payment on your student loans under control. A monthly payment plan of your loans that might be more manageable than your current situation.

Please contact me with any questions about your private student loans or federal student loans and how best to deal with them.