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How to Discharge Private Student Loans

How to Discharge Private Student Loans

Student loan debt is a significant burden for many individuals, particularly those who have taken out private student loans. Unlike federal student loans, private student loans often come with fewer borrower protections and less flexible repayment options. However, it is still possible to discharge private student loans under certain conditions. In this comprehensive guide, we will explore the various strategies and legal avenues available for discharging private student loans.

Understanding Private Student Loans

Loans proffered by private financial entities, such as banks or credit unions, serve to aid scholars in financing their education. These loans lack federal government backing and typically impose steeper interest rates while offering fewer repayment alternatives compared to federal student loans. Grasping the essence of these loans is imperative for investigating potential discharge avenues.

Main Differences Between Private and Federal Student Loans

  • Interest Rates: Private student loans usually have variable interest rates, which can increase over time, whereas federal student loans have fixed interest rates.
  • Repayment Options: Federal loans offer more flexible repayment plans, including income-driven repayment plans, which are generally not available with private loans.
  • Borrower Protections: Federal loans provide options like deferment, forbearance, and loan forgiveness programs, which are often not available with private loans.

Grounds for Discharging Private Student Loans

Discharging private student loans is challenging but not impossible. Several scenarios can lead to the discharge of these loans:

1. Bankruptcy

A principal avenue for absolving private student loans is through insolvency. Nevertheless, this procedure is intricate and necessitates fulfilling distinct stipulations.

The Brunner Test

To discharge student loans through bankruptcy, borrowers typically must pass the Brunner Test, which involves three criteria:

  1. Poverty: The borrower cannot maintain a minimal standard of living if forced to repay the loans.
  2. Persistence: The borrower’s financial situation is likely to continue for a significant portion of the repayment period.
  3. Good Faith: The borrower has made good faith efforts to repay the loans.

Undue Hardship

Proving undue hardship is essential for discharging loans in bankruptcy. This involves demonstrating that repaying the loans would impose severe financial difficulties on the borrower and their dependents.

2. Loan Servicer Misconduct

Another potential avenue for discharging private student loans is proving loan servicer misconduct. This includes instances where the loan servicer:

  • Engaged in fraudulent practices.
  • Violated consumer protection laws.
  • Misled the borrower about the terms and conditions of the loan.

3. School Closure or Fraud

Borrowers may also discharge private student loans if the school they attended closed while they were enrolled or if the school committed fraud, such as misrepresenting job placement rates or the quality of the educational program.

Steps to Discharge Private Student Loans

Discharging private student loans requires a strategic approach. Here are some point wise researched steps that will help you in this situation.

Step 1: Assess Your Situation

Begin by thoroughly assessing your financial situation and the specific details of your private student loans. Gather all relevant documents, including loan agreements, payment history, and correspondence with the loan servicer.

Step 2: Consult a Bankruptcy Attorney

Considering the intricacies involved in absolving private student loans via bankruptcy, seeking counsel from a seasoned bankruptcy attorney who specializes in student loan cases is prudent. Such an expert can ascertain whether you meet the criteria for undue hardship and navigate you through the legal labyrinth.

Step 3: File for Bankruptcy

If you decide to pursue bankruptcy, you will need to file a petition with the bankruptcy court. Your attorney will help you prepare the necessary documentation and represent you during court proceedings.

Step 4: Prove Undue Hardship

During the bankruptcy proceedings, you will need to provide evidence to support your claim of undue hardship. This may include financial records, testimony, and expert opinions demonstrating your inability to repay the loans.

Step 5: Explore Alternative Discharge Options

If bankruptcy is not a viable option, consider other discharge avenues, such as proving loan servicer misconduct or school fraud. This may involve filing complaints with regulatory agencies or pursuing legal action against the loan servicer or educational institution.

Alternatives to Discharge

While discharging private student loans can be challenging, there are alternative strategies to manage and reduce the burden of these loans:


Refinancing involves taking out a new loan with a lower interest rate to pay off existing private student loans. This can diminish monthly remittances and curtail aggregate interest expenditures. However, refinancing federal loans into private loans can result in the loss of federal borrower protections.

Loan Modification

Some private lenders offer loan modification programs to help borrowers who are struggling to make payments. These programs may include temporary interest rate reductions, extended repayment terms, or other adjustments to make the loan more manageable.

Debt Settlement

Debt settlement involves negotiating with the loan servicer to settle the debt for less than the full amount owed. This can be a viable option if you are facing severe financial difficulties and cannot afford to repay the loan in full.

Forbearance or Deferment

Although less common with private loans, some lenders may offer forbearance or deferment options, allowing borrowers to temporarily suspend payments due to financial hardship. 


Discharging private student loans is a complex and challenging process, but it is not impossible. By understanding the legal criteria and exploring all available options, borrowers can find a path to financial relief. Consulting with a qualified attorney and staying informed about your rights and options is crucial in navigating this difficult terrain.



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