Home > Student Loans > Can You Discharge Private Student Loans in Bankruptcy? Financial Options for Students

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The following article is a summary prepared by the authors of various articles about bankruptcy. It is not intended as, and should not be read as, legal advice. If you feel you need to consider bankruptcy, you should contact an attorney in your area who is qualified to lead you through this complex and weighty decision. You should not rely on this article or any Internet article to guide your decision.

Contrary to conventional wisdom, a private student loan, much like a federal student loan, is dischargeable under the right circumstances and has been since 2005. Popular thought may lead you to believe that filing bankruptcy on your private student loans is hopeless, but that’s not exactly true.

If you can’t repay your student loans, or you do not qualify for public service loan forgiveness (PSLF) or flexible student loan repayment plans, such as an income driven repayment plan, extended repayment plan, or Pay As You Earn Repayment Plan (PAYE), then bankruptcy may be an option to consider. This is especially true for borrowers who take loans out after July 1, 2019, as Congress looks to end PSFL and other repayment programs.

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    But while it is possible to discharge private student loans in bankruptcy, there are major consequences to your credit score. With 20 years of experience, Credit.com uses financial expertise to help you rebuild your credit and bounce back from bankruptcy. We’ve outlined the process and criteria for discharging your private student loans, as well as how you can save your credit through specialized services, like credit monitoring and personalized consultations.

    As a student, you can also take advantage of credit cards intended just for students to begin building your credit and earning rewards. Check out Credit.com’s expert guide to the best credit cards for students to earn cash back and save on things like books, dining, entertainment, and even electronics.

    How Will Student Loan Bankruptcy Affect My Credit Score?

    Unfortunately, student loan bankruptcy will ultimately carry with it some serious consequences, and will likely negatively affect your credit score. Even if bankruptcy seems like the best choice for you right now, you should still heavily consider the long-term repercussions that will impact your credit over the next several years. In the case of a Chapter 7 bankruptcy, it takes only about 90 days to forgive the debt tax-free. While the process may seem like it’s over, there is still more work to do to make up for the impending hit to your credit score.

    Building credit, especially for younger borrowers, is not easy when bad credit gets in the way of owning a credit card. You can find secured credit cards with lower annual fees and payment alerts. You are less likely to be denied a secured credit card than a standard credit card, so repairing your credit doesn’t feel like an impossible goal.

    What Is a Qualified Education Loan?

    Student loans are protected against bankruptcy by law unless eligibility is proven otherwise. However, many loans can be referred to as student loans without meeting the right requirements. According to bankruptcy attorney Craig Andresen, in order for a loan to be qualified as a student loan:

    “(1) it must have been made under a government or nonprofit student loan program, or (2) it must be a qualified educational loan under section 221(d)(1) of the Internal Revenue Code, for attending an eligible education institution as defined in section 221(d)(2) of the Internal Revenue Code, and incurred for costs of attendance as defined in section 472 of the Higher Education Act.”

    Andresen says, “Perhaps you were not an ‘eligible student’ at the time the private student loan was made to you; or maybe the loan was not incurred to pay ‘qualified education expenses’; or perhaps the loan was not for attendance at an ‘eligible education institution’ because the school was not accredited under Title IV of the Higher Education Act. All these are requirements imposed by section 221(d) of the Internal Revenue Code. Failure of a private student loan to meet any of these criteria means that the loan is fully dischargeable, because it would not qualify under section 523(a)(8) of the bankruptcy law.”

    Still searching for the right student loan? It’s important to know the details of your private student loan in the event of a financial rough patch. Taking out large, private loans may not always be the best first option, especially if you have poor or non-existent credit. However, if a private student loan is still necessary, you can be matched with an appropriate loan for your credit score and financial situation through Credit.com.

    What Schools Qualify as Eligible Education Institutions?

    If you owe private student loans for a school that was not accredited, your loans can probably be discharged in a Chapter 7 bankruptcy right away. Even some big-time lenders still make private student loans to such unprotected organizations. It’s quite common to find vocational and trade school students with these types of unprotected loans. Flight schools for pilots seem to be notoriously unaccredited, yet pilots errantly labor under hundreds of thousands of dollars of unmanageable student loans believing there is no hope for them. You can see some real case studies showing how easily these loans were discharged.

    In particular the issue that makes these private student loans so easily dischargeable in bankruptcy is the fact the school was not an “eligible educational institution” or that the loans were for a “qualified higher education expense.”

    The characteristics of a private student loan get even more specific. An accredited school must also have offered Title IV federal loans or the private loans may not be protected from discharge in bankruptcy.

    Expert Tip: But wait! Just because your school met all the requirements of a Title IV of the Higher Education Act of 1965 doesn’t mean some or all of your private student loans are not eligible to be eliminated in bankruptcy. If your loans were used for things other than a “qualified higher education expense,” the law does not protect those amounts. If you used your private student loan money for things other than tuition, books, supplies, and required equipment, that part of your student loans may be eliminated in bankruptcy today.

    Do Your Private Student Loans Fall Under the Statute of Limitations?

    If your private student loans are still protected, there is still some good news. All private student loans are no longer legally collectible once they have expired under the statute of limitations in your state. Unlike federal student loans that have no statute of limitations, private student loans are not guaranteed by the government and can fall under the rules of each state. In that case, while they may be listed as a debt on your bankruptcy filing, there isn’t much of a need since the lender can no longer sue you or garnish your wages over those debts. In some states, the statute of limitations is as little as three years. In others, it is 15 years.

    As of June 30, 2010, federal student loans are no longer guaranteed by the federal government, though they are made directly. All loans taken out before this date are still considered federal student loans and do not fall under the same statute of limitation rules as private student loans.

    Claiming Undue Hardship in a Student Loan Bankruptcy Case

    A Chapter 7 bankruptcy alone will not wipe away your student loan debt. In order to stop collections altogether, you will have to file a petition for a determination of undue hardship. Claiming undue hardship means that repaying your loan is too difficult and too expensive — like a weight that moves the scale from “struggling” to “suffering.” This determination will take place in an adversary proceeding in bankruptcy court.

    There are three criteria you must meet to successfully claim undue hardship in a student loan bankruptcy case:

    1. Proof that repaying the loan means you will not achieve a minimal standard of living
    2. Evidence to prove that hardship will continue throughout the loan repayment period
    3. Proof that you made a true effort to repay the student loan before filing bankruptcy

    This three-step measurement is also known as the “Brunner Test,” and if all requirements are met, your lender will no longer be able to collect loan payments from you.

    So, what circumstances are likely to prove undue hardship? Serious health concerns or permanent disability can indicate that the student loan borrower can’t work to make repayments. In addition to health, a poor financial situation can be enough to sway the decision. Repayments can cause significant financial strains for single mothers or individuals whose dependents can’t live on the current family income. Or, you may be able to prove that you have hit maximum earning capacity at a wage that is too low to sustain a minimal standard of living.

    If the determination of undue hardship is unsuccessful, you can still apply for Chapter 13 bankruptcy, which allows the court, rather than the lender, to determine the monthly size of repayments. These payments will often be smaller and allow for more flexibility for several years until repayments return back to normal or the borrower petitions once again for undue hardship.

    Student loan bankruptcy does not have to permanently damage your credit. If you are filing for private student loan bankruptcy or your student loans have been discharged, start by signing up today for a free credit report. Credit.com also offers free Experian credit scores, credit reports, and expert advice that can help you create an action plan to rebuild your credit.

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    • http://www.credit.com/ Credit.com Credit Experts

      Student loans are generally unsecured loans.

      • Peggy

        If you have a unsecured loan like great Lakes from discover card does that make it harder to bankrupt on. And we have come signed with our grand son, how would that affect it in bankruptcy court?

        • Jeanine Skowronski

          Student loans are generally not dischargeable in bankruptcy, unfortunately, even private ones, under current law.



          • Peggy

            Thanks for your reply.. all is still good.. we had gone on a loan with the grandson and so far my and my daughters been paying it so all good for now. I just worry things may change and we are both on ssi.. and I know student loans is 1 thing they can take from your ssi check.. I’m probably scared over nothing.. thanks again

      • Peggy

        Thanks for replying to me.

    • Lostindebt

      I have over 200K in student loans, As much as 85K are private loans for a for-profit school that I had to use a great deal of the funds for living expenses due to the 40Hr a week school schedule. I went to Full Sail University. My payments are 700/month on private loans and I have income based repayment on my federal loans. i do have a co-signer on my loans which is my step-father. Neither of us can afford the payments on the loans and I’m not sure what my options are and if there is anything I can do that wouldn’t force my co-signer to do the same?

      • http://www.credit.com/ Credit.com Credit Experts

        Private student loans generally aren’t as flexible as federal student loans, when it comes to repayment. But you need to pay your student loans. Contact your student loan servicer and ask if there’s anything you can work out so that you can afford to stay current on your loans.

    • BP

      Currently I have over $60k in private student loan debt. A good portion of my current income goes toward this debt. I do not have any other debts. I do not own a car or have my own place either because of this excessive debt. My credit reports look horrible due to the periods of time I was not able to pay. Is there anything I can do? When I took out the loans it was to take care of a place to live, transportation (Cabs, catching rides), and tuition. I am in need of a vehicle and it’s been a little bit of a challenge to save to buy cash, and I’m concerned I can’t get financing. I wouldn’t mind getting an additional job to bring in more income, but I currently care for my grandparents in addition to my full time job, which is a job within itself. Does anyone have any suggestions?

      • Jeanine Skowronski

        You can find some information about student loan forgiveness programs here:


        Thank you,


      • Michael

        you can call and ask to have your student loans differed for 6 months due to lakc of income or hardship, use that time to save for a car, although your interest will add up on the loan it will still give you a chance to save, just dont make it a habit.

    • Alex Bacon

      I made the mistake of going to [redacted] (a for profit diploma mill) and currently have about $50k in private student loans. Half through [redacted] and half through [redacted]. I was unable to finish schooling there because of financial reasons and had to leave the school. I was told that the credits I’ve earned would transfer to another school, and none did transfer. I gained absolutely nothing from attending that school. It was a complete bust. Now here’s where things get fun, I was hired at [redacted] as a part time employee. If I were lucky I would get 20 hours a week at $9 an hour. I had $303 payments to [redacted] and about the same to [redacted]. I was forced to leave my apartment, and become homeless, that I couldn’t pay for, survive off of about $5 a week on food and live in my truck with a PO Box to send and receive mail from. I have been doing this for the past YEAR and I’m at my witts end on options. Neither [redacted] or [redacted] will work with me and my credit is too poor to refinance myself. My cosigners, my dad and grandfather, are both unemployed and can provide no assistance whatsoever in my repayment process. I know you can’t offer legal advice but I’m stuck between a rock and a hard place here.

    • KyleB

      Filed for Ch 7 in 2009 in Nevada due to failed business and co-mingled funds. Over $130K in all private student loans. Not a single payment has been made on all of the loans except 2 since the bankruptcy, payments were continued on 2 because they could be afforded. Currently in collections and receiving 1099-C for debt cancellation. None of the funds for the student loans were used for school and used for business when it began to fail. Bankruptcy Attorney secured $2k to file adversary proceedings and after 2 years of no progress, he quit the business and returned funds last month. These loans are overbearing, and don’t know what to do from here. Any help would be great.

      • http://www.credit.com/ Credit.com Credit Experts

        Kyle —
        It sounds like you need legal advice. We wish we could help, but you really need to consult an attorney.

    • Periwinkle

      I filed a chapter 7 and used an incompetent attorney, he wanted $2500 to file an adversary proceeding to rid me of the private loan!

      My BK was granted and then I filed my own adversary proceeding asking only for my private loan to be discharged. I figured, I couldn’t screw up any worse than the attorney did on the initial filing!

      I made a few small mistakes, but the judge wiped out my private loan from Chase, and Chase never answered my summons!

      Hope this helps a bit! Not saying Chase or your particular bank won’t respond, they just didn’t in my case.

      • Jaziya

        My attorney is not doing what he is supposed to and has already been paid. He is assuming private loans will be discharged without filing anything. I did not use my private loan for school expenses at all and it is not federally backed and was not certified through the college. Can you tell me what you did on your own to get private loan discharged? You can file after discharged on other debt?

    • Jennifer wilson

      Good Afternoon:

      I never thought in my wildest dreams of even thinking about filing for bankruptcy, but until reading this article and looking at my own finances, it is worth a shot. I graduated from college in 2004 with student loan debt of $65,000 but Sallie Mae at $20,000 more to my loan. Sometime last year Sallie Mae brought it down to $79,000, but I still believe it should be lower. It has been a struggle even living day by day, especially with a older parent who is close to 70. I currently live in NYC and my schooling was in PA. Is there any way that I can file Chapter 7? I am concern about the fallout that will occur when purchasing a car, renting or buying a home, etc. I would greatly appreciate your help.

      Thank you

      • http://www.credit.com/ Credit.com Credit Experts

        Jennifer —
        You could talk with a bankruptcy attorney (a consultation is often free). In addition, some credit counseling services now work with student loans. You can read more about that option here: I’m 58 & Have $65K of Student Loan Debt. What Can I Do?

    • Randy

      I’m writing about a private student loan my mom co-signed on. I’ve been out of school now since 2010, but have only been working part-time.
      I accidentally missed the minimum $25/month payment on the loan, which was the amount on the “income-based repayment” plan I have with them.
      Well, it was then turned over to a law firm collection agency.
      I recently went to court with them and they wanted $70/month on the $2500 owned (on that loan with them). My TOTAL debt with them is over $44,000. But the $2500 is one of the loan disbursements I was going to court for. (I’m still in collections with them for the $44,000 though).
      My mom filed her own bankruptcy a bit over three years ago. Her lawyer at that time asked her about that loan, but my mom said it was mine, and that she just co-signed on it.
      Well, my mom told me I should consider filing bankruptcy on the $44,000 loan, but I told her she co-signed on it, and that they may come after HER then for the debt.
      Would this be the case on a private loan co-signer? I told her if they came after her for it, then I might as well keep it then and consider maybe Chapter 13 reconsolidation instead.
      Being she filed Bankruptcy three years ago, if I did try filing the Chapter 7 on the loan, would she be able to mention this……that she filed Bankruptcy three years ago?
      Thanks for any general advice you can give me on the topic. Just looking for general information really on private school loans and co-signers with Bankruptcy. I realize no personal advice can be given.


      • http://www.Credit.com/ Gerri Detweiler

        As a cosigner on the loan your mother is equally liable for the loan. The fact that she filed for bankruptcy doesn’t affect her liability for this loan. In fact, if you were able to successfully discharge the debt the responsibility would fall to her. Unless she discharged this debt in her bankruptcy, the fact that she filed doesn’t likely protect her. Have you considered talking with an attorney with experience in student loan law to discuss your options? You can find one via the websites of the National Association of Consumer Advocates or TheStudentLoanLawyer.com.

        • Randy

          Hi Gerri.

          Thanks so much for the information on this. I kinda’ figured it would fall to her, but just wanted to hear it from someone that knows the laws well. So thank you for the reply back.

          I haven’t yet, but I will go to the website you suggested on student loan law. I also considered using one of those non-for-profit debt management companies that consolidate all your debt, and for a small fee ($25 a month for the one by me) they will contact the companies you owe money to and work out something with them.

          If I went this way, do you know if the student loan company that has taken me to court already, could be handled by them too? Or, once in court, you have to accept whatever they are pursuing then currently for a payment?

          I also thought of Chapter 13 debt-consollidation, but not sure how it would affect the student loan currently in court…

          Thanks again Gerri.

          Sincerely, Randy

          • http://www.Credit.com/ Gerri Detweiler

            Randy – There are some non-profit credit counseling agencies that also help consumers with student loan disputes. A few that provide this service include Greenpath, MMI and Cambridge Credit Counseling. That’s another option for you to consider.

            • Randy

              Hi Gerri.

              Do you know if they could still offer assistance with loans currently in court?

              Also, do you if they have offices Nationwide?

              Thanks Gerri.

            • http://www.Credit.com/ Gerri Detweiler

              All of those agencies work with consumers across the country. I’d say your best bet is to start with an attorney experienced in student loan law and if they can’t help then try a counseling agency.

    • Adam Glantz

      Hi there. I cosigned a promissory note for a private student loan (thru Citibank, now the debt is held by Discover) for an accredited school in 2000. In 2012, I was granted a Ch. 7 bankruptcy. I’ve heard that in many cases, student loan obligations are rarely absolved through a standard bankruptcy, but I think the statute of limitations ran out on this loan a long time ago. Can you tell me – What is my real obligation here?

      • http://www.Credit.com/ Gerri Detweiler

        Adam – We can’t provide legal advice but generally whether the statute of limitations has expired would depend on when the account went into default and state law. If the cosigner makes payments it could revive the statute of limitations. You may want to get your credit reports to see if they shed any light on the most recent activity on the account, and read the following pieces. (Note our chart is in the process of an updated.) Statute of Limitations On Debt Collection by State and
        7 Things You Need to Know About the Statutes of Limitation for Debt

        • Adam Glantz

          Thanks for the quick advice. Actually, my credit report motivated my question. The entries for this include the Remark “Included in Bankruptcy”. Does that make a difference?

          • http://www.Credit.com/ Gerri Detweiler

            Interesting. Have you talked with your bankruptcy attorney about it? I’d like to hear their opinion.

            • Adam Glantz

              My bankruptcy attorney isn’t an expert on student loans and has punted on the issue. Can you recommend where I can go to get some closure on this?

            • http://www.Credit.com/ Gerri Detweiler

              It may be that there isn’t a clear answer. If your loans were not discharged in your bankruptcy then it’s possible they could still be time barred, but if the cosigner makes payments it could revive the statute of limitations. Perhaps Joshua Cohen, aka The Student Loan Lawyer could advise.

            • Edwardo

              Hi, my wife has 2 private student loans totalling about $55k. These loans are about 14 years old and she hasn’t paid in about 2. We recently filed a joint chapter 7 BK and were wondering if those can be discharged. Where can we find out? Thanks in advance.

            • http://www.credit.com/ Credit.com Credit Experts

              Talk with your bankruptcy attorney.

    • Tanya

      Hi There,
      Can anyone give me advice on who to contact to help me with my student loan debt? I have $180,000 in private student loans, yet my degree allows a $35,000/year salary. That does not make sense. I cannot live with the burden of these loans. Thank you in advance!

      • http://www.credit.com/ Credit.com Credit Experts

        Tanya —
        As you know, it’s discouraging and disheartening to see a huge loan grow as you deploy as many resources as you can toward it.

        You may want to contact a reputable non-profit credit counseling agency that does student loan counseling to explore all your options. Cambridge Credit Counseling, Money Management International and a few others are doing this kind of counseling. You can read more about the problem in this story (though we realize you are much younger — the problem of a student loan that grows even as you pay is the larger challenge): I’m 58 & Have $65K of Student Loan Debt. What Can I Do?

      • http://GetOutOfDebt.org/ Steve Rhode

        You know, your case sounds very similar to one I wrote about were debts were discharged and reduced in bankruptcy. Checkout the Opp case at http://getoutofdebt.org/53143/a-look-at-sallie-mae-student-loans-discharged-in-bankruptcy-in-2012

    • http://www.winecountryfamilylaw.com/ Lindsay Torgerson

      The problem lies in 523(a)(8)(ii)–“funds received as an educational benefit, scholarship, or stipend.” My recent case, Institute of Imaginal Studies v. Christoff put an end to these private trade schools etc using this as a “catch-all” to protect them if there were no “funds received”, but this was in the 9th Cir. We’ll see if other circuits agree!

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