Student loan bankruptcy discharge

The Brunner test remains the controlling standard for adversity discharge in most federal circuits, but recent litigation and Department of Education guidance shifts have created meaningful variation in how courts apply the 'undue hardship' prong—making jurisdiction and timing of filing material considerations for borrowers evaluating bankruptcy strategy.

Public Service Loan Forgiveness program failures and the limited fresh-start provisions for Parent PLUS loans create a bifurcated landscape where certain borrower categories face substantially different bankruptcy discharge outcomes, despite similar financial circumstances—a distinction CNBC Select readers managing household education debt should understand.

The 2023 amendments to bankruptcy discharge standards, while not eliminating the presumption against discharge, have clarified that partial discharge and limited-term repayment plans warrant greater consideration, shifting bankruptcy counsel focus from whether discharge is possible to which repayment-discharge hybrid structures optimize debtor outcomes.