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A fairly common myth is that student loans cannot be discharged through bankruptcy (USA). For example, this NPR article discusses the myth and its falsity.

While I have been able to find plenty of information about discharging student loans, I have been unable to figure out the origin — or even the intended meaning — of the myth that “student loans cannot be discharged through bankruptcy”. Here are some of the ways that student loans are different:

  1. They can only be discharged through chapter 7/13 bankruptcy.
  2. Discharge is not automatic but requires an “adversary proceeding” where it must be established that repayment would present an “undue financial hardship”.
  3. Financial hardship is determined by the “Brunner test”, established in the late 80’s (1987; Brunner v. New York State Higher Education Services Corp) and is relatively difficult to establish.

Given these differences, “student loans can’t be discharged” might be a sloppy way to state the claims that

Student loans are not automatically discharged.

or

Student loans are exceedingly difficult to discharge, to the point that it might be said to be “practically impossible”.

The first claim is true, but doesn’t jive with how the myth is usually understood (as a claim of impossibility, not of “possibility with extra effort”). The second claim might be true, but could be misleading. While they are very onerous to discharge, this study referenced in the NPR article found that, while only 0.1% of bankruptcy filers attempt to discharge their student loan debt, those who do attempt to discharge their debt achieve some measure of success roughly 40% of the time (admittedly small sample size; but anything above maybe 20% or so would strike me as in tension with the claim of “practical impossibility”).

Instead of being a sloppy statement of some true-ish claim, the myth could be a piece of propaganda propagated by lenders in a manner similar to the fossil fuel industry’s push of climate change denial against their own research. I haven’t found any evidence of this, however.

Where does the myth that student loans cannot be discharged through bankruptcy originate?

Dennis
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    This question doesn’t seem to be on topic because it’s not asking “is [notable claim] true?” That being said, Iuliano explains what he thinks is the origin of the idea that student loan bankruptcy is hard in the paper you linked, right on page 26 (though it seems like a hypothesis to me). – Laurel Dec 26 '20 at 15:53
  • @Laurel I was under the impression that origin questions were on-topic. Here’s a [popular-ish example](https://skeptics.stackexchange.com/questions/43924/did-the-myth-of-carrots-improving-eye-sight-begin-as-wwii-propaganda?noredirect=1) and a [Meta question](https://skeptics.meta.stackexchange.com/q/4362) it led to. But I know that questions of topicality on SE can be somewhat shifty, so if origins are off-topic that’s fine. – Dennis Dec 26 '20 at 16:08
  • @Laurel As for the Iuliano claim, are you talking about the first point raised on 523 (“First, the view that...”)? I read that as him interpreting “impossible to discharge” as “practically impossible to discharge”. That might be the charitable interpretation of the claim but it doesn’t seem to match the popular, “mythical”, understanding. And as you say, it seems like his hypothesis and isn’t really argued for. – Dennis Dec 26 '20 at 16:14
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    The other question is on topic because “the myth started in WWII” is the notable claim. And I made a mistake, the paper that addresses this on p26 is [this other one.](https://poseidon01.ssrn.com/delivery.php?ID=339119017068084103079003087124109006099039071063064018087113118025126092088101003098102118004001052027117106103122001009127079109094092045027123066126089074114127087070047024085093010112126121088125079072089029121108005089015105112010065098122088118086&EXT=pdf&INDEX=TRUE) – Laurel Dec 26 '20 at 16:23
  • @Laurel I see, that is helpful. So if I were to find a notable hypothesis (perhaps Iuliano's) and ask whether it was true or not, would that be on-topic? Essentially, is the issue just that it isn't a true/false question about a notable claim regarding the origin of the myth? – Dennis Dec 26 '20 at 17:23
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    I reject the premise of this question. It relies on an assumption of a [single cause](https://en.wikipedia.org/wiki/Fallacy_of_the_single_cause). – Oddthinking Dec 26 '20 at 18:03
  • @Oddthinking Does it? It seems perfectly compatible with what is written and assumed in the question text that there are multiple causes. For example, a reasonable answer could be that it was a slide from "nearly impossible" to "impossible" that resulted primarily from, e.g., lawyers overstating the difficulty of discharge. Then it could be that this elision of "nearly" was promoted by lenders in some manner. (Not saying this is the answer, just that it's an answer assuming a complex cause that seems perfectly compatible with the question.) Is there part of the question that misleads here? – Dennis Dec 26 '20 at 18:12
  • Can I suggest a better approach to this would be asking "are student loans non-dischargeable" (which would be on topic on [money.se] and possibly here) and then self-answering? – DJClayworth Dec 26 '20 at 18:29
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    @Dennis: What if the cause is 1000 cases of "someone misunderstood"+15 cases of "a cell centre agent wanted to go to lunch, and told a customer a lie"+22 cases of "the full truth was too long for a tweet"+"poor financial education in schools"+"it fit into people's political preconceptions, so the myth tended to be shared where the truth didn't"+"the whole student funding system is broken"+"it isn't actually widely believed"+"it was misheard"->"the phone connection was poor"->"it is all because they changed to a cheaper VoIP codec". You assume there is a nice neat answer. – Oddthinking Dec 27 '20 at 07:06
  • The nice neat answer is: "Human societies share false urban legends. Always have. Always will." – Oddthinking Dec 27 '20 at 07:06
  • @Oddthinking No, “there is no clearly identifiable origin or cluster of origins” would be a perfectly acceptable answer, presumably accompanied by a number of early examples that don’t coalesce into a coherent narrative or cluster of narratives. Yes, people share urban legends. That doesn’t mean that no such legend has an identifiable origin or at least an identifiable locus of popularization..... – Dennis Dec 27 '20 at 08:03
  • [For example, the urban legend that Coca-Cola created Fanta to clandestinely sell in Nazi Germany originated with Max Keith, Fanta’s German creator](http://qcpages.qc.cuny.edu/~mfujimoto/JPN%20341/Urban%20legend%20English.pdf). You might be right that the answer is that there is no identifiable origin in this case, but that is just assuming a blanket answer to urban legend origin questions, an answer that is quite frequently false. – Dennis Dec 27 '20 at 08:06
  • "an answer that is quite frequently false." This is where I think we disagree. I think it is typical that the spread of urban legends (and indeed, all knowledge) has multiple factors operating at multiple levels. Without a specific claim of the origin, we will be unable to answer this question in the negative. Is the wording of the US Legal Code the cause (as one early answer seems to allege)? I am sure it is a factor, but I don't think anyone could say "this is the single cause". – Oddthinking Dec 27 '20 at 08:20

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This is not a site for legal advice, but this is generally covered by 11 U.S. Code § 523 which says

(a) A discharge under section 727, 1141, 1192, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

...

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—

(A)

(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

...

So saying “student loans can’t be discharged” appears to be the general rule, though there are exceptions, particularly if the court believes “undue hardship” can be shown. There was such a case in New York in July 2020.

Henry
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  • This seems to be arguing "It isn't really a myth. It is mostly correct, except for exceptional circumstances." So rather than saying where the myth comes from, it is denying a premise of the question. Is that right? – Oddthinking Dec 27 '20 at 07:09
  • @Oddthinking It is saying that “student loans can’t be discharged” comes from US legislation, and notes that legislation provides an exception – Henry Dec 27 '20 at 15:26
  • Yes, I can see it literally says that. But that doesn't seem to address the question. It doesn't ask whether student loans can be discharged, but instead takes that as a premise. I am trying to see how this can be seen as an answer to the question. – Oddthinking Dec 27 '20 at 16:31
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    I'd consider it an answer, because it cites a reliable source which not only explains the belief but specifically cites the exceptions OP knows about and is even an official (canonical) public document. It's sometimes hard to find a source for generally held beliefs, but as long as we're down to educated speculation, this is some pretty solid speculation. – Cristobol Polychronopolis Dec 28 '20 at 20:37