Blog Post | 114 KY. L. J. ONLINE | February 14, 2026
The Effective but Underutilized Way to Discharge Student Loan Debt in Bankruptcy
By: Jon E.B. McGee, Staff Editor, Vol. 114
An effective process to discharge federal student loan debt in bankruptcy was created in guidance published by the Department of Justice (“DOJ”) to its attorneys in 2022.[1] Yet, despite a growing number of student loan borrowers falling irretrievably into arrears, many continue to view student loans as practically non-dischargeable.[2] But DOJ’s guidance creates an easier path to discharge than existed before, and it is yielding excellent results.[3] Given the number of Kentuckians in default on student loans,[4] more Kentucky practitioners should become comfortable with the process to provide needed relief to student loan borrowers burdened by debt.
Student loan borrowers and their biggest lender, the Department of Education (“DoED”), are hurtling towards a “default cliff.”[5] Delinquency is rising and borrowers are likely to “default on their payments in droves.”[6] Many loans feature exorbitant, growing debt balances, which are hard to justify with grim job prospects in strained markets, especially for borrowers who failed to complete their degree at all.[7] Additionally, the shift from a pandemic-era payment pause into collection, all while borrowers face a sharp increase in living costs, has made it hard for many to work student loan payments back into their budgets.[8] In Kentucky, 93,000 borrowers were in default with DoED as of September 2025, placing the Commonwealth twentieth in the nation in defaulting borrowers.[9] Sure, Kentucky’s student loan problems are less dire than those suffered by other states.[10] Yet still, the “looming default cliff”––plus renewed DoED collection efforts––are poised to drive more Kentuckians, like borrowers everywhere, towards drastic forms of relief.[11]
Discharging student loans in bankruptcy seems like an obvious solution; however, decades of wisdom has convinced borrowers and lawyers that doing so is insurmountably difficult.[12] Under the Bankruptcy Code, an individual debtor cannot discharge student loans unless failing to discharge them would impose an “undue hardship.”[13] To seek discharge under this narrow exception, debtors must file an adversary proceeding against the DoED.[14] Most federal courts require debtors to satisfy the Brunner test to prove an undue hardship, which asks the debtor to show (1) that they are presently unable to maintain a minimal standard of living and repay the loan, (2) which is likely to persist for a significant portion of the loan’s term, (3) despite the debtor’s good faith efforts to repay.[15] The test is a high bar to meet as applied by courts, and the adversarial setting––along with DOJ’s previous policy of vigorously opposing discharge––compounded difficulties for debtors.[16] Before 2022, seeking student loan discharge was time consuming, unpredictable, and expensive for courts, taxpayers, and debtors at the height of their financial difficulties.[17] Lawyers rightfully grew weary of recommending student loan discharge to clients because, practically speaking, it could not be feasibly achieved.[18]
To address this, President Biden’s DOJ fashioned––and President Trump’s DOJ has maintained––a streamlined process to obtain discharge of federal student loans and ease the burden on borrowers in proving undue hardship.[19] Under the 2022 guidance a borrower in bankruptcy still needs to file an adversary proceeding against the DoED.[20] But after this, they only need to fill out and provide a boilerplate “attestation form” to DOJ lawyers with information about their financial status.[21] Using the form and other information at their disposal, DOJ lawyers, along with DoED as the creditor, determine whether the borrower qualifies under any one of a number of factors that are notably less burdensome to satisfy, and which the DOJ deems to presumptively demonstrate undue hardship.[22] If the borrower qualifies, DOJ lawyers will concede undue hardship and recommend discharge.[23] Finally, the judge will decide whether to accept DOJ’s recommendation.[24]
DOJ’s process for discharging student loan debt has proven effective in limiting the otherwise impenetrable difficulties that mar any borrower’s hope of obtaining student loan discharge.[25] The process makes proving undue hardship in adversary proceedings predictable, relatively easy, and less expensive.[26] It also instructs DOJ lawyers to apply a more lenient standard in assessing undue hardship.[27] This decreases the costs and increases the benefits of seeking student loan discharge through proving undue hardship. In turn, it should enable lawyers to easily assess whether doing so is viable.[28]
Ultimately, a recent study estimated that borrowers using the DOJ’s process have successfully obtained discharge in 87% of the adversary proceedings filed.[29] The DoED itself says borrowers using the process have successfully obtained discharge in 99% of the proceedings filed.[30] This contrasts against success rates that were as low as 39% in the years before DOJ’s guidance was published, when proceedings were even more sparse due to the heightened difficulty of obtaining discharge.[31] All of this marks a radical improvement.
Nevertheless, research shows practitioners have been slow to exploit DOJ’s process, primarily because many remain unaware or skeptical of improvements created by the guidance as a consequence of how difficult and costly obtaining discharge used to be.[32] This sustained belief is artificially restraining borrowers burdened with student loan debt from utilizing all available relief.[33] But the latest analyses from the government and others, as summarized above, show there is little left to fear. Given the increasingly large role student loan debt plays in burdening struggling borrowers,[34] lawyers should be rushing to learn and leverage DOJ’s process on behalf of a swelling base of potential clients who may be appropriate candidates for federal student loan discharge.
Kentucky practitioners who represent consumers in bankruptcy should familiarize themselves with the DOJ’s process for discharging student loan debt. Borrowers face enduring repayment problems,[35] and Kentucky’s student loan borrowers are no exception. While discharging student loan debt through the narrow undue hardship exception has been viewed as impractical and difficult, DOJ’s 2022 guidance has lightened the burden.[36] Lawyers are well advised to discuss these developments with those in bankruptcy who may be good candidates for discharge under DOJ’s guidance.[37] It might just provide them with the relief needed to truly enjoy a fresh start.
[1] Justice Department and Department of Education Announce a Fairer and More Accessible Bankruptcy Discharge Process for Student Loan Borrowers, U.S. Dep’t of Just. (Nov. 17, 2022), https://www.justice.gov/archives/opa/pr/
justice-department-and-department-education-announce-fairer-and-more-accessible-bankruptcy.
[2] See Angélica Serrano-Román, Student Loan Collections Are Poised to Test Bankruptcy Options, Bloomberg L. News (May 5, 2025, 05:00 EST), https://www.bloomberglaw.com/product/blaw/bloomberglawnews/bloomberg-law-news/XBPIBKRK000000 (predicting growth in student loan driven bankruptcy filings caused by resumed collection efforts on increasingly delinquent loans, but qualifying growth by a persistent belief that student loans cannot be discharged despite 2022 guidance).
[3] Tara Siegel Bernard, More Student Loan Borrowers Are Shedding Debts in Bankruptcy, N.Y. Times (Dec. 27, 2025, 21:46 EST), https://www.nytimes.com/2025/12/27/business/student-loans-bankruptcy.html.
[4] Defaulted Portfolio by Location, Fed. Student Aid (Sept. 30, 2025), https://studentaid.gov/sites/default/files/fsawg/datacenter/library/default-by-location.xls.
[5] See Michele Zampini, On the Edge of a “Default Cliff”: New Survey Shows Student Loan Borrowers Are Struggling to Keep Up, The Inst. for Coll. Access and Success (Dec. 5, 2025), https://ticas.org/affordability-2/2025-student-debt-survey-blog/.
[6] Id.
[7] Id.
[8] Id.; see also Aimee Picchi & Mary Cunningham, America’s Deepening Affordability Crisis Summed Up in Five Charts, CBS News: Money Watch (Nov. 19, 2025, 17:27 EST), https://www.cbsnews.com/news/affordability-2025-inflation-food-prices-housing-child-care-health-costs/ (noting inflated prices for daily necessities since 2022).
[9] Defaulted Portfolio by Location, supra note 4.
[10] Id.
[11] Zampini, supra note 5; Serrano-Román, supra note 2.
[12] Jason Iuliano, Bridging the Student Loan Bankruptcy Gap, 99 Am. Bankr. L.J. 414, 416 (2025).
[13] 11 U.S.C. § 523(a)(8)(A)–(B).
[14] Iuliano, supra note 12, at 420.
[15] Id. at 429–31; Brunner v. N.Y. State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2nd Cir. 1987).
[16] See Iuliano, supra note 12, at 431–32.
[17] See id. at 432.
[18] Id.
[19] Memorandum from the Assoc. Att’y Gen. on Guidance for Dep’t Att’ys Regarding Student Loan Discharge Litig. (Nov. 17, 2022), https://www.justice.gov/archives/asg/file/1553731/dl?inline. See also Bernard, supra note 3 (noting that the student loan discharge guidelines were introduced by DOJ, along with DoED, during President Biden’s Administration and that the agencies have not changed, and do not plan to change, the guidelines during President Trump’s Administration).
[20] U.S. Dep’t of Just., Guidance for Dep’t Att’ys Regarding Student Loan Bankr. Litig. 1–2 (2022), https://www.justice.gov/civil/file/1553726/dl?inline.
[21] Id. at 2.
[22] Id. at 4–14; Iuliano, supra note 12, at 439–40.
[23] U.S. Dep’t of Just., supra note 20, at 15–16.
[24] Id. at 16.
[25] Iuliano, supra note 12, at 460; Bernard, supra note 3; Angélica Serrano-Román & Alex Wolf, Student Loan Bankruptcy Relief Gains Traction in Few Courts, Bloomberg L. News (Jan. 20, 2026, 05:00 EST), https://www.bloomberglaw.com/product/blaw/bloomberglawnews/bloomberg-law-news/BNA%200000019b-c203-d228-a1df-f6cfb6b90000.
[26] See Iuliano, supra note 12, at 469 (noting that data indicates DOJ’s guidance created a process that is modestly reaching its goals, with room for improvement should adoption by borrowers increase).
[27] Id.
[28] Id. at 417; see U.S. Dep’t of Just., supra note 20, at 2.
[29] Iuliano, supra note 12, at 460.
[30] Id.
[31] Id. at 462.
[32] See Serrano-Román, supra note 2; Serrano-Román & Wolf, supra note 25; Iuliano, supra note 12, at 470.
[33] Serrano-Román, supra note 2; Iuliano, supra note 12, at 470.
[34] See Serrano-Román, supra note 2.
[35] Zampini, supra note 5.
[36] Iuliano, supra note 12, at 469–470.
[37] See Serrano-Román & Wolf, supra note 25.