To provide a more equitable discharge standard for student loan borrowers.
Sponsors
Legislative Progress
IntroducedMr. Correa (for himself, Ms. Adams, Ms. Balint, Mr. Carter …
Summary
What This Bill Does
The Student Loan Bankruptcy Improvement Act of 2025 amends Section 523(a)(8) of the U.S. Bankruptcy Code by striking the word "undue" from the hardship requirement for discharging student loan debt. This change lowers the legal standard from "undue hardship" (an extremely difficult threshold under the Brunner test) to simply "hardship."
The amendment applies retroactively to bankruptcy cases commenced before, on, and after the date of enactment.
Who Benefits and How
Student Loan Borrowers: The primary beneficiaries are the approximately 43 million Americans with federal student loan debt. Currently, only 0.01% of student loan debtors successfully discharge their loans through bankruptcy. The new "hardship" standard would give bankruptcy courts flexibility to adopt more reasonable discharge criteria, dramatically expanding access to debt relief.
Bankruptcy Attorneys and Legal Services: Lawyers and legal aid organizations will see increased business as the viable path to discharge encourages more borrowers to pursue adversary proceedings. Currently, attorneys discourage clients from seeking discharge because the "undue hardship" standard is nearly impossible to meet.
Debtors Without Degrees: The Congressional findings note that most bankruptcy filers with student loans never obtained degrees or received credentials that failed to improve their employment prospects - a group that would particularly benefit from easier discharge.
Who Bears the Burden and How
Federal Government/Department of Education: As the holder of most federal student loans, the government will absorb discharged debt as losses. With 20% of borrowers in default and potentially 10 million heading toward default, significant federal loan portfolio losses are expected.
Private Student Loan Lenders: Banks and financial institutions that hold private student loans will face increased discharge rates and potential losses, though the Congressional findings suggest these losses may be offset by improved repayment plan opportunities through bankruptcy proceedings.
Taxpayers: Ultimately, federal student loan losses are absorbed by taxpayers through reduced government revenue or increased deficit spending.
Key Provisions
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Section 3 (Amendment): Strikes the word "undue" from 11 U.S.C. 523(a)(8), changing the discharge standard from "undue hardship" to "hardship"
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Section 4 (Application): Makes the amendment apply retroactively to all bankruptcy cases - past, present, and future
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Section 2 (Findings): Establishes Congressional record documenting the failure of the current "undue hardship" standard, with specific statistics on borrower distress and the near-impossibility of discharge under current law
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
To make student loan debt dischargeable in bankruptcy by removing the "undue hardship" requirement, replacing it with a simpler "hardship" standard
Policy Domains
Legislative Strategy
"Single surgical amendment to existing bankruptcy code that achieves maximum policy impact (dramatically expanding discharge eligibility) with minimal legislative complexity. Retroactive application ensures immediate relief for pending and future cases."
Likely Beneficiaries
- {'entity': 'Student loan borrowers', 'mechanism': 'Lowered discharge threshold enables access to bankruptcy relief previously blocked by near-impossible "undue hardship" standard'}
- {'entity': 'Borrowers in default or financial distress', 'mechanism': 'With 6+ million borrowers 90+ days past due and 20% in default, immediate expanded discharge pathway available'}
- {'entity': 'Borrowers without degrees or with worthless credentials', 'mechanism': 'Congressional findings specifically cite these groups as deserving relief since their education investment failed'}
Likely Burden Bearers
- {'entity': 'Federal government/DOE', 'mechanism': 'Holder of federal student loans will absorb discharge losses'}
- {'entity': 'Private student loan lenders', 'mechanism': 'Increased discharge eligibility reduces loan recovery rates'}
- {'entity': 'Taxpayers', 'mechanism': 'Federal loan losses ultimately flow to taxpayers through budget impacts'}
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
Key Definitions
Terms defined in this bill
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology