The Moral Imperative to Restore Constitutional Bankruptcy Protections to Student Loan Debt

Education has long served as a thread connecting aspiration to opportunity for generations of Americans. Yet the promise of upward mobility that higher education has traditionally provided has become increasingly broken by the suffocating burden of student loan debt—an albatross that millions of borrowers are obligated to carry for decades, often with little hope of relief. 

Student loan debt is unlike virtually all other forms of consumer debt in one critical respect: It is largely ineligible for discharge through bankruptcy. This modern reality stands in stark contrast to the broad bankruptcy protections that shield individuals from the lifelong consequences of insurmountable debts. The time has come to recognize the moral imperative to restore bankruptcy protections to student loan debt — not only as an immediate matter of fairness and justice, but as an essential step toward a more equitable and prosperous society.

For most of American history, bankruptcy laws provided a safety net for those overwhelmed by debt, including higher education loans. In fact, the right to declare bankruptcy is stated in the Constitution before the right of a country to coin currency or even raise an army. This changed gradually, beginning in the late 1970s, as policymakers, erroneously concerned about potential abuse, began to chip away at these protections. In 1976, Congress first restricted the discharge of federal student loans through bankruptcy, requiring a waiting period. Over the ensuing decades, this waiting period was extended and, in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act effectively eliminated bankruptcy discharge for nearly all student loans, including private loans, except in cases of “undue hardship” — a standard so stringent that relief is rarely granted. The result is that today, close to 2 trillion dollars in student loan debt hangs over the heads of American borrowers. This debt is, for most, an inescapable obligation, regardless of circumstances or personal catastrophe.

At the heart of bankruptcy law lies the principle of a “fresh start”: individuals who find themselves crushed by unmanageable debt, whether from medical expenses, credit cards, or failed businesses, may seek relief and begin anew. Student loan borrowers are the glaring exception to this rule. This discrepancy is unjust on its face. Why should a person who borrows to pay for gambling debts be able to discharge their debt, while someone who borrows to gain an education cannot? Denying bankruptcy protections to student loan borrowers violates the principle of equal treatment under the law and perpetuates a system in which financial ruin is codified based on the loan’s origin, rather than the borrower’s circumstance.

Critics of bankruptcy protections often invoke the issue of personal responsibility and “moral hazard.” Borrowers, they argue, should be held accountable for their choices. Yet personal responsibility is a two-way street. The social contract between citizen and state ought to guarantee that, when misfortune strikes — whether through illness, unemployment, or economic downturn — individuals are not condemned to perpetual penury. The bankruptcy system is designed not to reward irresponsibility, but to distinguish between bad faith and honest misfortune. In simplest terms, to strip one class of borrowers of this option is to hold them to an impossible standard, and to betray the foundational ideals of compassion and fairness.

Student loans are often marketed as a “pathway to opportunity,” but for millions, they become a generational shackle. Parents and even grandparents co-sign loans or borrow on behalf of younger family members, risking their own financial futures. When bankruptcy protections are denied, entire families may be drawn into a cycle of indebtedness that forecloses on the promise of upward mobility. Restoring bankruptcy rights to student loans is, at its core, a matter of intergenerational justice: It is a recognition that the pursuit of education should not lead to a lifetime of financial despair.

Student loans are often marketed as a “pathway to opportunity,” but for millions, they become a generational shackle.

The numbers paint a bleak picture. Over 43 million Americans carry student loan debt, and the average balance continues to climb. Borrowers who default or are unable to pay often face wage garnishment, ruined credit, lost professional licenses, and, in some states, even the loss of driver’s licenses. These consequences extend far beyond the borrower, undermining entire communities, depressing economic activity, and exacerbating racial and economic disparities. 

A particularly troubling aspect of the student debt crisis is the mounting burden faced by Americans over the age of 50. Once considered a problem for the young, student debt now haunts people approaching retirement and those long past their college years. Many in this age group are repaying loans for their own education, while a growing number have taken on debt to help children or grandchildren attend college. As a result, the number of Americans over 50 with student loan debt has ballooned in recent years, with balances sometimes stretching well into six figures. For these older borrowers, the consequences are especially dire. Many are forced to delay retirement, drain their savings, or even continue working into their seventies just to keep up with payments. Some face the garnishment of Social Security benefits — a lifeline meant to support Americans in old age — as a result of defaulting on student loans. The psychological toll is immense: Instead of looking forward to a secure retirement, many live with persistent anxiety and are trapped in a cycle of debt that, absent bankruptcy protections, may never be broken.

The effects are especially severe for borrowers from marginalized backgrounds. First-generation college students, people of color, and those who attend for-profit institutions are disproportionately likely to struggle with repayment. For these groups, the absence of bankruptcy protection transforms student loans from a stepping stone to a stumbling block.

Opponents of reform claim that restoring bankruptcy rights would open the floodgates to abuse. Yet, bankruptcy is neither easy nor consequence-free; it carries significant social and financial stigma, and remains a last resort for most. Evidence from before the 2005 reforms shows that rates of student loan discharge via bankruptcy were extremely low, and comparable to other forms of unsecured debt. Some argue that lenders, taxpayers, or the government would face unsustainable losses if bankruptcy protections were reinstated. But a humane bankruptcy system is designed precisely to balance the needs of creditors against the reality that some debts cannot, and will not, ever be paid. Moreover, the human cost of financial ruin—on health, families, and communities—is far greater than the theoretical risk to the lending system.

Allowing borrowers the option of bankruptcy does not mean opening the door to recklessness. Rather, it provides a critical safety valve for those who—through no fault of their own—cannot repay their debts. It restores agency, hope, and the possibility of redemption. A more compassionate bankruptcy regime would not only relieve individual suffering, but also enhance economic vitality. Freed from unpayable debt, former borrowers would be able to start families, buy homes, invest in their communities, and pursue entrepreneurial ambitions — all of which have multiplying effects on the holistic health and sustainability of our communities.

We must not allow the pursuit of knowledge to become a life sentence of debt. The time has come to reclaim bankruptcy protections for student loan debt, and in so doing, to reaffirm the values of empathy, equity, and opportunity that lie at the heart of the American dream.

Lisa Ansell is the Associate Director of the USC Casden Institute and Lecturer of Hebrew Language at Hebrew Union College-Jewish Institute of Religion Los Angeles.