Student debt has long presented formidable challenges, particularly when it comes to the possibility of discharging such loans through bankruptcy. However, recent data reveals a notable shift in the success rates for borrowers seeking relief from their student debt in bankruptcy court. According to a study published in The American Bankruptcy Law Journal by Jason Iuliano, a professor at the University of Utah’s S.J. Quinney College of Law, the rate at which student loan borrowers successfully discharge their debt in bankruptcy has surged to an impressive 87%.
This marks a significant increase from previous years, when the success rates were markedly lower: 61% in 2017 and just 40% in 2007. Iuliano’s analysis was based on a comprehensive dataset encompassing 652 bankruptcy discharge cases from October 2022 to November 2023 involving student loans.
The improved outcomes can largely be attributed to recent changes in bankruptcy guidelines introduced by the Biden administration. In November 2022, the U.S. Department of Education and the Department of Justice established new policies that enable student loans to be treated similarly to other types of debt under bankruptcy law. Borrowers now have the opportunity to complete a 15-page attestation form, which allows them to outline their financial difficulties and make a case for their loan discharge. Notably, the previous administration has not overturned this guidance.
The implications of this change could be profound for the more than 42 million Americans holding more than $1.6 trillion in student loans.
Legal experts are increasingly noting the transformative nature of the easier bankruptcy process. Malissa Giles, a bankruptcy attorney in Virginia, remarked that this new framework has been “life-changing” for her clients, many of whom have struggled with student debt for decades. “It allows them to sleep at night,” she said, highlighting the emotional toll excessive debt can impose.
Interestingly, the data indicates that women comprised 73% of the student loan bankruptcy filers in the analyzed cases. Filers had an average student loan balance of $115,000, with 10% of borrowers owing over $240,000. The range of ages among these debtors was substantial, spanning from 24 to 76 years.
Despite these positive trends, many individuals still hesitate to initiate the necessary steps to discharge their student loans through bankruptcy. Iuliano’s research found that while over 3 million student loan borrowers filed for bankruptcy between 2011 and 2024, only a small fraction—7,293 individuals—proceeded with the additional lawsuit needed for loan discharge, known as an adversary proceeding. Iuliano emphasized that the deeply rooted belief that student loans are impossible to discharge in bankruptcy leads many attorneys to overlook this vital option for their clients.
As the labor market weakens and the landscape of student debt shifts, these bankruptcy changes may provide a critical lifeline for many struggling borrowers. With more than five million student loan borrowers currently in default—a figure anticipated to rise to approximately ten million—the urgency of finding viable financial solutions is real. As enforcement steps ramp up, including the wage garnishment of those in default starting in January, the new bankruptcy process could become one of the few paths available for borrowers seeking relief.
Iuliano poignantly remarked, “For many people, interest and fees have turned the balance into something they can never repay, so bankruptcy is the only real path out.”
