Student Loan Bankruptcy Improvement Act of 2025

The Student Loan Bankruptcy Improvement Act of 2025 would overhaul how student loan debt can be discharged in bankruptcy by removing the current “undue hardship” standard (the Brunner test used by most courts) and replacing it with a broader, more flexible “hardship” standard. The bill amends 11 U.S.C. Section 523(a)(8) by striking the word “undue,” thereby changing the discharging standard for student loans in bankruptcy. The goal, according to the bill’s findings, is to provide a fairer, nationwide path to relief for borrowers who struggle with student debt, while preserving core bankruptcy safeguards like means testing and disclosure requirements. The measure applies to cases started before, on, or after the date of enactment, meaning it could affect both existing and future bankruptcy filings. The bill cites decades of passivity or difficulty in discharging student loans under the current standard, arguing that the Brunner test is outdated and inconsistent with bankruptcy’s “fresh start” purpose. It emphasizes rising delinquencies and defaults, potential credit-score harm, and the fact that a very small share of debtors currently obtain discharges under the undue-hardship framework. By replacing the standard, the bill envisions more reasonable criteria for relief while retaining the integrity of bankruptcy processes.