Student debt has long been considered difficult, if not impossible, to discharge in bankruptcy. But that hasn’t been the case in recent years, a new study finds.
The success rate for student loan borrowers who attempt to discharge their debt in bankruptcy has “jumped” to 87%, according to an analysis published in The American Bankruptcy Law Journal this month by Jason Iuliano, a professor at the University of Utah’s S.J. Quinney College of Law. In 2017, the success rate for education debt holders in bankruptcy was 61%, and in 2007, it was 40%, Iuliano found.
“People who file for discharge are winning at very high rates,” Iuliano told CNBC. His study used a final dataset of 652 bankruptcy discharge cases from October 2022 to November 2023 that included student loans.
The improved outcomes for student loan borrowers in bankruptcy stem, in large part, from updated bankruptcy guidelines the Biden administration issued. In November 2022, the U.S. Department of Education and the Department of Justice rolled out a policy that experts say treats student loans more like other types of debt in bankruptcy court. Borrowers can fill out a 15-page attestation form, detailing their financial struggles and making their case for a mulligan.
