Student Loan Liability

[AnnaJames]

Michigan/US Law
Scenario: A student takes out a $5000 Federal loan disbursed $3000 to college and $2000 to student as a refund. The student drops the classes and the college is now obilgated to pay the $3000 they received back to the government. The student now owes $2000 to the government and $3000 to the school.
Question: If the student files chapter 7 bankruptcy, is the entire $5000 non-dischargable because it started out as federal money or is the $2000 non-dischargable and the $3000 can be discharged because it is due to the college?

 

[Antigone*]

Michigan/US Law
Scenario: A student takes out a $5000 Federal loan disbursed $3000 to college and $2000 to student as a refund. The student drops the classes and the college is now obilgated to pay the $3000 they received back to the government. The student now owes $2000 to the government and $3000 to the school.
Question: If the student files chapter 7 bankruptcy, is the entire $5000 non-dischargable because it started out as federal money or is the $2000 non-dischargable and the $3000 can be discharged because it is due to the college?

This will not be discharged in BK. The entire $5,000 is what the student is on the hook for. This debt will follow them to the grave or until paid, whichever comes first.

 

[AnnaJames]

Schools obligation

If the college paid the $3000 back to the fed then it becomes a personal account between the student and the college right? College invoices ARE dischargable. Why wouldn't this be?

 

[Silverplum]

If the college paid the $3000 back to the fed then it becomes a personal account between the student and the college right? College invoices ARE dischargable. Why wouldn't this be?

Aw, Tiggins, you fell for a homework question!

 

[Antigone*]

Aw, Tiggins, you fell for a homework question!

Dang it... back to my corner.

 

[AnnaJames]

I'm confused, I just need an answer about the liability to the student and to the college.

 

[Who's Liable?]

It depends on what the college ACTUALLY did with the $3K. If they DID return it to the govt., and they(student) have proof of this, than they are only liable for $2K. However the Gov't is still looking to get this remaining amount paid back.

Which they still won't be able to discharge.