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Discharge a Student Loan

Figure Dealing With Debt
HIGHLIGHTS
  • Student loans aren't usually discharged by a Chapter 7.
  • Student loans can be discharged under some circumstances.

Learn How to Discharge a Student Loan In Bankruptcy.

Due to bankruptcy reforms in 1998 and 2005, it is almost impossible for an average, non-disabled person to discharge federal or private student loans through bankruptcy. You may be able to get help with your payments through a bankruptcy filing, but there are better options for repaying your student loans.

The Student Loan Bankruptcy Exception

As with all rules there is one exception: you can discharge a student loan in bankruptcy due to undue hardship. Undue hardship is defined as the permanent physical inability to work. You must prove in bankruptcy court that:

  • You are physically unable to work
  • You are likely to be unable to work for most of the loan term
  • You made a good-faith effort to repay the debt
  • Paying it would prevent you, your spouse, and your dependents from maintaining a "minimal" standard of living.

If you believe you qualify under these guidelines, see an experienced bankruptcy lawyer for help filing an adversary proceeding as part of your bankruptcy case.

How Bankruptcy Can Help with Student Loans

Although your student loan can't be discharged in bankruptcy, a bankruptcy court may be able to ease an overwhelming debt burden. Some courts may discharge a portion of your student loans, but this is rare and varies by court.

In most cases, the judge will incorporate your student loans into your debt repayment plan under Chapter 13 bankruptcy. Any balance remaining after the payment plan ends will still be due, but your other debts should be paid off by then.

What to Do if You Are Heading Toward Bankruptcy

If your total debts have reached an unsustainable level and you feel you must file for bankruptcy, don't simply stop paying your student loans. Not only are student loans not dischargeable in bankruptcy, but also the federal government has the right to assess stiff penalties, seize tax refunds and other government assistance money, and garnish your wages.

Lenders want to help you avoid default. Contact them for help applying for a deferral, forbearance, or extended repayment plan before the situation gets worse than it already is.

Solutions for Student Loans You Do Not Owe

If a lender is demanding payment for a student loan you don't think you owe, it's best to resolve the situation before you wind up in bankruptcy court.

The most typical situation is a miscalculation of the actual loan balance, especially if the loan has changed lenders multiple times. If you think the lender is requesting more than you owe or hasn't properly credited payments, write to them with your evidence. If the issue is not resolved, then a court can intervene to determine the amount you actually owe. A bankruptcy judge may also do this as part of a bankruptcy proceeding.

Your debt may be canceled if one of three situations apply:

  • Situation 1: Your school closed before you completed your education and you couldn't complete it elsewhere. You don't qualify if you voluntarily withdrew before the school closed. You may be entitled to a loan reduction if you voluntarily withdrew and the school improperly withheld any remaining student loan funds.
  • Situation 2: Your school or another party signed the promissory note in your name without your approval or the school falsely certified you as eligible for a student loan when you were not.
  • Situation 3: You were forced to withdraw due to a disability that developed while you were in school, or that certifiably worsened after you accepted the loan.

For all three situations, it is best to contact the lender or the federal student loan program for assistance in resolving your un-owed debts. Although a bankruptcy court can sort it out for you, other solutions are simpler and better for your financial future.

Student Loan Cancellation Programs

More About Student Loans
Need a Student Loan? Start Here!
Student Loan Consolidation
Private Student Loan Default
How to Pay Off a Student Loan
Help with Your Student Loan Debt
Settle a Private Student Loan
Public Service Loan Forgiveness

Several federal and state agencies offer programs to help you cancel or reduce all or a portion of your student loan debt without filing for bankruptcy. Most programs involve teaching, nursing, or military service. To learn more about available programs and how you can apply, visit the Federal Student Aid Web site.

In most cases, bankruptcy will not erase your student loans. Although bankruptcy is still a viable solution for desperate financial situations, it is best for your future financial well being to avoid it. Contact your lenders as soon as a problem develops to avoid worse financial repercussions.

Comments (23)


Atara A.
Hazel Crest, IL  |  January 30, 2012
I am a single mom with a two defaulted student loans I have an associates degree in special education. I cannot further my career at this point with defaulted student loans and obtain a decent salary because defaulted student loans make you unqualified under NCLB. Would this be considered an undue hardship?
Bills.com
January 30, 2012
As we mention in the original answer above, undue hardship is usually related to a disability that prevents the borrower from earning an income. However, each bankruptcy court sets its own standards for what "undue hardship" is, so I will not say your creative definition is outside the realm of possibility. Consult with a bankruptcy lawyer who has experience litigating bankruptcy student loan undue hardship cases for a better opinion than mine. Do not take the word of the first lawyer you find — you need a specialist within the bankruptcy specialty.
Laura W.
Decatur, GA  |  January 07, 2012
My mom co-signed on some of my loans; and she's pretty old so if she dies, will I be fully responsible for all of these loans or just mine??
Bills.com
January 07, 2012
Both the primary borrower and the co-signer have 100% liability for repaying a loan. If the co-signer dies, the primary borrower's liability does not change.

You ask your question on a student loan page. If a parent (or other relative) has a Parent Plus Direct Loan, and then dies, the loan is extinguished.
Angela R.
Hayward, CA  |  November 16, 2011
My aunt cosigned my student loan for me. Now she is very ill and having hardships. She wants her name off my loan. I can not pay the balance of the loan in full to remove her name. I do pay on the loan and can pay on the loan. Is there away to remove her name?
Bills.com
November 16, 2011
If Sallie Mae services your student loan, see the Bills.com resource Sallie Mae Debt to Income Ratio, which may be curiously titled, but addresses your question.

If Sallie Mae is not your student loan servicer, review your student loan contract to see if it offers a 24-payment clause similar to Sallie Mae's.
Annette K.
Hazlehurst, GA  |  November 14, 2011
while over seas i attended school. i dropped out before the semester ended. the school took out a student loan without my permission and i had no contact with the school. they took loans out for two semesters. i never sighned a promisary note. can i sue the school to pay the loan off
Bills.com
November 14, 2011
By all means, hire a local lawyer in the country where you attended school who has civil litigation experience to represent you.
Pat L.
Wilton Manors, FL  |  October 29, 2011
I made a mistake a couple of years ago and co-signed a student loan with my granddaughter. I am on Social Security and being dunned by collectors for payment on her loan, she has been working at minimum wage since dropping out of school in 2nd semester and giving birth to son. What are options if any???
Bills.com
October 29, 2011
Your question is, unfortunately, a frequent one among Bills.com readers. I know of four ways to remove a co-signer from a loan:
  1. Refinance: Ask the other signer to refinance the loan in their name alone.
  2. Pay off the loan: Paying off the loan removes the liability for all co-signers.
  3. File for chapter 7 bankruptcy: A successful bankruptcy filing resulting in a discharge of this debt will remove the co-signer's liability for the debt.
  4. Fraudulent signature: If the co-signer never signed the loan document, or signed the document under duress, then a court making that finding may order the creditor to remove all references to the debt in the victim's credit report, and cease any collection efforts.

Readers, I welcome your thoughts and suggestions for other successful tactics to remove a co-signer's liability for a loan.

Carmen B.
Little Rock, AR  |  October 03, 2011
A private student loan was falsely put in my name and now my wages are about to be garnished. If I did not get any money or my school did not get any money how do I get to where I will not have to pay this money back.
Bills.com
October 03, 2011
Have you spoken to the lender? When you were first contacted, did you validate the debt? I realize that you may not have found out about this matter until your employer told you that you wages were going to be garnished.

Consult with a lawyer who has civil litigation experience. The attorney can review the paperwork you received and take the proper steps to have the garnishment stopped. If any of your wages are taken for a debt that you don't owe, you can get your money back. Please report back and inform me and fellow readers what happened.
Susan S.
Louisville, KY  |  September 17, 2011
I heard that I could have my student loan discharged if I di not have a high school diploma or a G.E.D., is this true?
Bills.com
September 19, 2011
I know of no such option for a discharge or forgiveness. Readers, if you do, please share a link to the page on the Dept. of Education Web site or other credible Web site that discusses this option.

Editor's note: After we wrote this answer, we uncovered the following. According to the Dept. of Education document Common Disputes Involving Defaulted Student Loans, "You may be eligible to have a loan discharged (forgiven):
  • If you did not have a high school diploma or general equivalency diploma (G.E.D.) at the time you borrowed the loan, or
  • If the school did not determine your ability to benefit in accordance with the federal requirements that were in effect at the time you were enrolled, or
  • If you did not complete a remedial education course or obtain your G.E.D.

Different standards may apply depending when you borrowed."

Download the Loan Discharge Application: False Certification (Ability To Benefit) (PDF) to start the process.

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Susan S.
Louisville, KY  |  September 21, 2011
I believe I got this off of your link, federal student aid questions.
Bills.com
September 21, 2011
The single most comprehensive resource that outlines federal student loan cancellation and forgiveness is the Federal Student Aid Ombudsman Group's Cancel or Discharge a Loan Web page. Another good resource is the U.S. Department of Education's Loan Cancellation & Discharge Web page. See also the Federal Student Aid Discharge/Cancellation Web page.

If you are disabled, go to the Dept. of Education's Total and Permanent Disability (TPD) Discharge Web site.
Pat R.
Burleson, TX  |  June 25, 2011
If you are totally disabled, write to the US Treasury Department, they will totally wipe your student loans off with proof of total disability. My doctor signed mine, I sent it in, and the US Treasury sent me a receipt that the loans were all totally forgiven, I owe nothing. My credit score is 819 with all 3 bureaus, and my credit has not been harmed, no bankruptcy either.
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Michele H.
B/o Freemansburg, PA  |  June 30, 2011
Pat - what information did you have to supply to the Treasury department? We are in the same position, steps away from bankruptcy.
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Pat A.
Burleson, TX  |  June 30, 2011
What I did, I got the form from the Treasury dept to have the doctor fill out stating I am totally disabled and mailed it in to the US Department of Treasury, address should be supplied. I would google US Treasury Dept or call and have them mail you the form to be filled out by your doctor. That is all that I did and submitted it, and a few mos later, got a letter from them stating the loans were all forgiven. I checked my credit bureau to make sure, and they were gone.. I also called to make sure, and sure enough, they were dismissed.
Bills.com
June 30, 2011
Pat, thank you for sharing your experience and valuable information.
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Krystel K.
Youngtown, AZ  |  August 10, 2011
What type of student loans were they that were forgiven?
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Jerry R.
Hamer, SC  |  November 12, 2011
is there an age limit? My wife is sixty years and has been unemployed going on two years. Due to budget cuts her job was taken away? Is there any hope for student loan debt dismissal? Thanks, Jerry
Bills.com
November 14, 2011
There is no age limit and the terms of federal student loan dismissal are very stringent. Even in the case of bankruptcy, cancellation of the debt is rare.
Thanks for your feedback!
 
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