A fairly common myth is that student loans cannot be discharged through bankruptcy (USA). For example, this NPR article discusses the myth and its falsity.
While I have been able to find plenty of information about discharging student loans, I have been unable to figure out the origin — or even the intended meaning — of the myth that “student loans cannot be discharged through bankruptcy”. Here are some of the ways that student loans are different:
- They can only be discharged through chapter 7/13 bankruptcy.
- Discharge is not automatic but requires an “adversary proceeding” where it must be established that repayment would present an “undue financial hardship”.
- Financial hardship is determined by the “Brunner test”, established in the late 80’s (1987; Brunner v. New York State Higher Education Services Corp) and is relatively difficult to establish.
Given these differences, “student loans can’t be discharged” might be a sloppy way to state the claims that
Student loans are not automatically discharged.
Student loans are exceedingly difficult to discharge, to the point that it might be said to be “practically impossible”.
The first claim is true, but doesn’t jive with how the myth is usually understood (as a claim of impossibility, not of “possibility with extra effort”). The second claim might be true, but could be misleading. While they are very onerous to discharge, this study referenced in the NPR article found that, while only 0.1% of bankruptcy filers attempt to discharge their student loan debt, those who do attempt to discharge their debt achieve some measure of success roughly 40% of the time (admittedly small sample size; but anything above maybe 20% or so would strike me as in tension with the claim of “practical impossibility”).
Instead of being a sloppy statement of some true-ish claim, the myth could be a piece of propaganda propagated by lenders in a manner similar to the fossil fuel industry’s push of climate change denial against their own research. I haven’t found any evidence of this, however.
Where does the myth that student loans cannot be discharged through bankruptcy originate?