Politics
Before 1976 student loans were dischargeable like any other debt. Congress stripped that right between 1978 and 2005. Success rates for discharge are less than one percent. For-profit colleges built their business model around the permanence of that debt.
NewsOnScale Staff
September 16, 2026
Before 1976 student loans could be discharged in bankruptcy the same as any other unsecured debt. A series of congressional actions between 1978 and 2005 stripped that right away entirely. The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act was the final move — it made both federal and private student loans effectively non-dischargeable regardless of circumstances.
Credit card debt can be discharged. Medical bills can be discharged. Personal loans can be discharged. Student loan debt — in most cases — cannot.
No substantive policy analysis justified the change. Congress did it anyway.
What Borrowers Face Today
To discharge student loans in bankruptcy a borrower must prove undue hardship through a separate legal proceeding called an adversary proceeding filed inside their bankruptcy case. The legal standard — known as the Brunner test — requires proving three things simultaneously: that the borrower cannot maintain a minimal standard of living while repaying the loans, that their financial situation is unlikely to improve, and that they made a good faith effort to repay.
Courts have interpreted this standard harshly. Success rates have historically been estimated at less than one percent.
The result is that Americans who file for bankruptcy to escape crushing debt can discharge almost everything they owe except their student loans. Those travel with the borrower through bankruptcy and out the other side unchanged.
Who This Hurts Most
Federal data shows the borrowers most likely not to be paying their student loans attended private for-profit colleges — schools that market aggressively to low-income students, rely almost entirely on federal financial aid for revenue, and deliver degrees with limited labor market value.
Lisa Collenbaugh owes the US government $10,389.47 for a certificate program she could not afford to finish at UEI College. She cannot discharge it.
A 50-year-old mother of two named Diane Barta attended Ashford University for a master's degree. She accumulated over $120,000 in student loan debt. Her husband lost his job. She filed for bankruptcy in 2012. She discharged most of her debts. The $120,000 she owed Ashford survived her bankruptcy intact.
How For-Profit Colleges Benefited
The for-profit college industry profited directly from the non-dischargeable nature of student debt.
A student who takes out loans for a traditional investment — a car, a home, a business — can walk away from that investment in bankruptcy if it fails. A student who takes out loans for a for-profit college degree that fails to deliver promised job placements cannot walk away. The debt is permanent.
For-profit colleges understood this. They marketed aggressively to low-income students who had access to federal financial aid precisely because those students could borrow freely with no ability to discharge the resulting debt if the education failed to deliver.
Senator Dick Durbin described the result plainly: She was a good person who worked hard. She had two degrees from a community college and then another college before she went for a master's degree at Ashford University. That was her downfall.
Ashford University is now notorious. The debt it generated is not going anywhere.
What Congress Has Not Done
The Student Borrower Protection Center has called for elimination of the undue hardship requirement. Bipartisan bills have been introduced in Congress to restore student loan dischargeability. The FRESH START Through Bankruptcy Act was introduced with bipartisan Senate support.
Section 523(a)(8) of the Bankruptcy Code — the provision that makes student loans non-dischargeable — remained intact through 2025 and into 2026. No enacted federal legislation has changed the statutory framework.
The One Big Beautiful Bill Act signed July 4 2025 restructured federal student loan limits and repayment plans. It did not restore bankruptcy discharge rights.
The Honest Question
Congress granted banks and for-profit colleges a protection that no other creditor receives — the ability to issue debt that follows a borrower through bankruptcy and cannot be escaped regardless of circumstances. That protection was granted without substantive policy analysis. It has remained in place for nearly 50 years.
The people bearing the cost are not Ashford University. They are Lisa Collenbaugh and Diane Barta and 45 million Americans carrying $1.7 trillion in student loan debt — many of whom attended schools that no longer exist, received degrees with no labor market value, and cannot discharge what they owe even after losing everything else in bankruptcy court.
DISCLOSURE: NewsOnScale is an independent media publication operated by AMILLI AI CORP. JJ Johnson is the founder of AMILLI AI CORP and a declared candidate for President of the United States in 2028. All facts in this article are drawn from NPR, the American Bankruptcy Institute, the Consumer Financial Protection Bureau, the Senate Judiciary Committee, and publicly available federal bankruptcy law.