The Undue Hardship Standard: How Courts Evaluate Student Loan Discharge

The term "undue hardship" appears in 11 U.S.C. § 523(a)(8) — the section of the Bankruptcy Code that makes student loans non-dischargeable unless the debtor can prove their repayment would cause undue hardship. Congress never defined the phrase, leaving courts to develop their own frameworks. The result is a body of case law that varies by circuit, but most courts apply the Brunner test, a three-part framework that has been the dominant standard since 1987. The 2022 DOJ guidance has significantly influenced how courts and the government evaluate each prong, and discharge rates in 2023–2025 have increased substantially as a result.

3 Prongs Brunner test requires all three elements to be satisfied 8 of 11 Federal circuits that apply the Brunner test Partial Discharge of just a portion of the balance is possible

What Is Undue Hardship and Why Does It Exist?

Student loans were first made non-dischargeable in bankruptcy in 1976, following concerns that students were borrowing federal loans and then immediately filing bankruptcy to discharge them before ever beginning repayment. Congress added the "undue hardship" exception as a safety valve — a recognition that some borrowers genuinely could not repay and shouldn't be permanently burdened. But by giving courts no guidance on what "undue hardship" meant, Congress left the standard to develop through litigation — and it developed harshly.

Through the 1980s and 1990s, courts applied increasingly rigid interpretations. The standard became one that only borrowers with permanent, total disability — or similarly extreme circumstances — could realistically meet. This deterred attorneys from filing adversary proceedings, which reduced case volume, which meant courts rarely had to think carefully about where the line actually should be. The 2022 DOJ guidance, and a string of thoughtful appellate decisions in the years since, have recalibrated what undue hardship means in practice.

The Brunner Test: The Three-Part Framework

The Brunner test, derived from Brunner v. New York State Higher Education Services Corp. (2d Cir. 1987), requires the borrower to establish three independent elements by a preponderance of the evidence. All three must be satisfied.

Prong 1 Current inability to maintain a minimal standard of living

The borrower must show that, based on current income and reasonable necessary expenses, they cannot maintain a minimal standard of living for themselves and their dependents while also repaying the student loans. "Minimal" does not mean comfortable or adequate — it means subsistence-level. Courts compare income to actual expenses and consider what amount would remain for loan repayment. Where nothing remains, or where loan payments would push household spending below a poverty-level baseline, this prong is satisfied.

Prong 2 Circumstances unlikely to change over a significant portion of the repayment period

The hardship cannot be merely temporary. The borrower must show that the current inability to repay is likely to persist — not necessarily forever, but for a significant portion of the standard 10-year repayment period or the actual remaining repayment period. This prong is typically satisfied by evidence of permanent disability, chronic illness limiting earning capacity, age at which career advancement is unlikely, or structural barriers to employment (such as a degree in a field with no viable job market).

Prong 3 Good-faith effort to repay the loans

The borrower must demonstrate good faith in their dealings with the loan system — not that they successfully repaid, but that they did not game or evade the system. This includes making payments when financially able, exploring income-driven repayment options, and not engaging in conduct designed to abuse the bankruptcy system. Under the 2022 DOJ guidance, genuine inability to pay is not evidence of bad faith, and failure to enroll in income-driven repayment due to lack of awareness or inability to navigate the system is not treated as bad faith.

The Totality of Circumstances Test

The 8th and 1st Circuits use a different framework — the "totality of the circumstances" test — which is more flexible and less binary than Brunner. Rather than requiring all three independent prongs to be satisfied, courts in these circuits look at the borrower's overall financial situation: past, present, and reasonably foreseeable future. The totality test considers income, expenses, earning potential, health, dependents, and any other relevant factor. A borrower who narrowly fails one Brunner prong might prevail under totality, and vice versa.

Borrowers and attorneys in 8th and 1st Circuit jurisdictions should be aware that this test can produce different outcomes from Brunner circuits — sometimes more favorable, sometimes not, depending on how the overall picture reads to the court. Other circuits have, in recent years, signaled openness to softening their Brunner application in ways that functionally approach a totality standard.

What "Minimal Standard of Living" Actually Means

Courts apply the federal poverty guidelines as a baseline for evaluating whether a borrower's income and expenses clear the minimal standard of living threshold. The DOJ guidance explicitly identifies household income at or below 150% of the federal poverty line as a primary factor favoring discharge. For 2025, the federal poverty guideline for a single individual is approximately $15,650 annually (in the contiguous 48 states). At 150%, that's approximately $23,475.

But the analysis isn't purely about poverty-line math. Courts also evaluate whether expenses are reasonable — courts do not allow luxury items or discretionary spending to inflate expense totals artificially, but they also do not strip budgets down to bare subsistence when legitimate needs exist. Medical costs, transportation necessary for employment, childcare, and housing costs in the relevant market are all factored in. The key question is whether any margin remains after legitimate necessary expenses — and whether that margin is anywhere near sufficient to service the student loan debt.

The "Good Faith" Requirement: What It Means and What It Doesn't

The good faith prong is frequently misunderstood. Some attorneys and servicers have argued that a borrower who never made a single payment, or who never enrolled in income-driven repayment, cannot show good faith. Courts have increasingly rejected this cramped interpretation. Under the post-2022 framework, good faith is evaluated as a totality — not as a checklist of required actions.

What good faith means: you borrowed for legitimate educational purposes, you didn't deliberately incur debt you had no intention to repay, and you responded reasonably to your loan obligations given your actual circumstances. What good faith does not require: making payments when doing so was genuinely impossible, enrolling in every available repayment plan before filing, or exhausting every deferment or forbearance option. The inquiry is whether the borrower acted honestly and without intent to abuse the system — not whether they are a perfect borrower who did everything administratively correct.

How the 2022 DOJ Guidance Changed the Analysis

The November 2022 joint guidance from the DOJ and Department of Education instructed government attorneys to evaluate attestation forms using a set of factors that closely track what courts should consider under a properly applied Brunner test. The guidance explicitly named certain factors as weighing in favor of recommending discharge:

• Household income at or below 150% of the federal poverty level
• Income that has remained persistently low for the prior five or more years
• Disability or medical condition that limits earning capacity
• Age: if the borrower is within ten years of retirement
• Balance that substantially exceeds the amount originally borrowed due to capitalized interest
• Enrollment in a program that did not lead to credentialed employment

The guidance also instructed DOJ attorneys to give borrowers credit for attempting to use available repayment programs and not to treat failure to complete every administrative step as bad faith. The effect was to bring DOJ practice in line with a more realistic and borrower-sympathetic reading of Brunner — one that focuses on economic reality rather than procedural compliance.

Building the Evidence: What Courts Need to See

A successful undue hardship case is built on documentation. Courts need to see more than a borrower's narrative of hardship — they need records. The evidentiary record for a strong case typically includes: recent tax returns showing income history, current pay stubs or benefit statements, medical records and physician letters documenting any disability or chronic condition, an itemized budget with support for each expense category, the loan history showing original balance, total amount paid, and current balance, and documentation of any income-driven repayment enrollment or applications.

When the DOJ evaluates an attestation, they cross-reference the borrower's income claims against Social Security earnings records, IRS transcripts, and other government databases. Inconsistencies between the attestation and government records will result in scrutiny or rejection. An experienced attorney ensures the attestation is complete, internally consistent, and well-documented before submission.