Document Type
Research Memorandum
Publication Date
2026
Abstract
(Excerpt)
Student loan debt represents one of the largest categories of consumer debt in the United States. Currently, statistics show that there is $1.8 trillion in outstanding student-loan debt owed by approximately 42.5 – 45.8 million debtors. This statistic can be attributed to the fact that the cost of higher education has increased significantly. Department of Education data shows that average tuition prices have more than doubled at colleges and universities around the country over the last three decades. As a direct consequence of this continuously increasing cost of tuition, many debtors have struggled to pay back their student-loan debt, eventually landing in default. As of mid-2025, approximately 5.3 million debtors were in default on their student loan payments.
Many debtors are of the belief that by declaring bankruptcy, they will be able to get their student loan debt discharged, providing them with fresh financial starts. However, while this may be the case with a lot of other forms of unsecured debt, the Bankruptcy Code does not treat student loan debt like most forms of consumer debt. Congress has placed strict limitations on when student loan debt can be discharged, requiring debtors to meet the high standard of having to prove that should they be forced to repay the debt they would face “undue hardship.” If a debtor is unable to prove “undue hardship” the debt remains nondischargeable, meaning that it will survive the debtor’s bankruptcy proceedings and must be paid back with any accumulated interest. This memorandum explains the statutory framework governing discharge of student loan debt, the procedural steps a debtor must follow in order to seek discharge, the legal standard that a debtor must meet to show “undue hardship,” the treatment of the student loan debt if discharge is denied, and proposes an alternative interpretation of the “undue hardship” standard.