You can file bankruptcy on student loans and get a fresh start — but it’s a challenge. Unlike other types of debt that go away automatically at the end of a bankruptcy case — e.g., medical bills, credit card debt, repossessions, and so on — you have to file a separate lawsuit to get rid of both federal and private student loans.
In the lawsuit, you’ll need to overcome decades of case law and convince a judge of one of two things. First, repaying your federal student loans will cause you an undue hardship. That’s hard to do because the Education Department offers affordable monthly payments with income-driven repayment plans and student loan forgiveness programs that wipe out your remaining balance if you work in public service, pay for 20+ years, or suffer a permanent disability.
Learn More: Can You File Bankruptcy on Student Loans?
Second, in the case of private student loans, you can avoid battling the undue hardship requirement if you can show that the loans you borrowed exceeded your school’s cost of attendance. Back in the mid-2000s, a lot of banks loaned money to students without checking if they had already received enough federal financial aid or scholarships to cover their tuition and living expenses. Those loans are now held by companies like National Collegiate Student Loan Trust, Navient, Citizens Bank, and so on.
Learn More: What Happens to Private Student Loans in Bankruptcy?