Student loan delinquencies have returned to credit reports after years of pandemic-era pauses, and the effects on many people’s household finances have been sharp. According to the Federal Reserve Bank of New York, 10.6% of outstanding student loan balances were at least 90 days past due in the second quarter of 2026. Credit scores have fallen, and many borrowers are struggling to manage payments alongside their other financial obligations. For some, that has made student loans and bankruptcy a subject worth examining rather than a last resort.
A bankruptcy attorney can review a borrower’s full financial picture and explain what filing would and would not accomplish. That conversation matters more than in most situations, because the relief available to student loan borrowers differs from what people may generally assume bankruptcy provides.
Why Are More Student Loan Borrowers Falling Behind on Payments?
Federal student loan payments were paused for more than three years, and during part of that period, missed payments were not reported to credit bureaus. Payments resumed in October 2023, but missed payments did not really begin appearing on credit reports again until 2025.
The return of delinquency reporting has caused a sharp increase in reported overdue balances. By mid-2026, more than one-tenth of outstanding student loan debt was seriously delinquent. Credit damage followed. Borrowers who previously had strong credit histories suddenly faced serious late-payment records. That damage can compound, because lower scores can raise auto loan costs, affect rental applications, and create additional financial obstacles.
The End of the SAVE Repayment Plan
Federal repayment changes have added another challenge. The SAVE repayment plan ended in March 2026, requiring affected borrowers to move to another plan. For some households, that means adjusting to a different monthly payment while managing debts that have continued to grow.
Can Student Loans Be Discharged Through Bankruptcy?
Student loans can be discharged through bankruptcy, but the process requires an extra step called an adversary proceeding. Borrowers must show that repaying their loans would cause undue hardship. Courts will consider whether borrowers can afford basic living expenses, whether their financial problems are likely to continue, and whether they have tried to repay their loans.
In 2022, the federal government introduced a simpler process for requesting student loan relief. Borrowers can submit financial information for review. Ultimately, a bankruptcy judge will make the final decision, and they can approve a full or partial discharge.
How Can Bankruptcy Help Even if Your Student Loans Are Not Discharged?
Student loans are rarely the only debts involved in a bankruptcy case. Many borrowers are also managing other financial obligations, including:
- Credit card balances with high interest rates
- Medical bills from treatment that insurance did not cover
- Unsecured personal loans and buy now, pay later balances
- Overdue mortgage or vehicle loan payments
- Home equity loans or credit lines secured by property
Many unsecured debts can be discharged through bankruptcy. Secured debts, such as mortgages and vehicle loans, require different treatment because the lender has a claim against the property.
A borrower who eliminates $40,000 in credit card balances and medical bills could free up money previously spent on those payments. That may make the remaining student loan debt easier to manage.
Bankruptcy in this situation is not necessarily a way around the student loans. It is sometimes a way to reduce other financial pressures, making repayment more realistic.
Can Bankruptcy Stop Student Loan Collections?
The federal government can collect on defaulted student loans by garnishing wages or withholding tax refunds without a court judgment. However, in January 2026, the Department of Education paused these collection actions. That pause remained in place in late October 2026.
Filing for bankruptcy provides another form of protection called the automatic stay. This stops most debt collection and garnishment activities, including student loan collections.
While bankruptcy does not automatically erase student loans, the stay can provide temporary relief. It can give a borrower time to review their repayment options and work toward a more manageable financial situation.
Is Chapter 7 or Chapter 13 Better for Student Loan Borrowers?
Both types of bankruptcy can provide financial relief, but they work differently. The right choice may depend on income, assets, and whether the borrower needs time to catch up on other debts.
Chapter 7 Bankruptcy
Chapter 7 can eliminate qualifying credit card debt, medical bills, and personal loans in about three to four months. Eligibility depends on income and expenses. However, borrowers risk losing property not protected by bankruptcy exemptions. Collection protection is often temporary, and student loans will remain payable unless they are discharged separately.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy runs for three to five years under a court-approved repayment plan. The automatic stay can provide protection throughout the repayment period, although a court can lift it in certain circumstances.
Chapter 13 also allows a borrower to catch up on a mortgage or vehicle loan while the plan runs. This can help someone who has fallen behind on housing or transportation expenses while struggling with student loan payments.
Student loan payments can be included in a Chapter 13 repayment plan. However, any remaining balance is typically still owed unless the borrower receives a separate discharge.
What Should Student Loan Borrowers Consider Before Filing Bankruptcy?
Student loan borrowers have several options for financial relief, including bankruptcy. Federal income-driven repayment plans can lower monthly payments based on income and family size. These options changed in 2026 with the introduction of the Repayment Assistance Plan. Eligibility depends on the type of loan and when it was issued.
Borrowers who are in default can also use rehabilitation or consolidation to regain access to repayment options. Other programs may cancel loans for people with permanent disabilities or those whose schools closed or engaged in misconduct.
The best choice depends on a person’s income, other debts, and long-term goals. A bankruptcy attorney can help borrowers compare their options and determine which approach offers the most financial relief.
Disclaimer: The content in this article is provided for general knowledge. It does not constitute legal advice, and readers should seek advice from qualified legal professionals regarding particular cases or situations.
