Student Loan

[Cassy]

I live in California. I believe banks and other lenders make loans generically referred to as student loans. Some are federally insured/guaranteed and I believe the Higher Education Act of 1965 and its amendments set forth regulations governing the servicing of loans made under the Act through Public Law which is further clarified as United States Code Title 20 - Education. Chapter 28, Part B, Section 1087 defines how loans of bankrupt, deceased, or disabled borrowers will be treated. I believe the Department of Education has regulatory authority over the life of these loans. I don't know that I have stated this correctly but I am trying to set the premise for my question.

My question has to do with other non-federally insured "student loans" which are made under various service marks by lenders. Sometimes these loans are referred to as private, credit based loans. They emulate the federal loans in some regards and purport to be non-dischargeable in bankruptcy because they are student loans funded all or in part by a nonprofit. However the nonprofit entity for these non-federal loans doesn't not meet the nonprofit test for federal student loans which state the nonprofit must have an agreement with the Secretary of the Department of Education as defined under section 1078(b) of Title 20. So, are these other "student loans" also regulated by the Higher Education Act of 1965? If not, what laws/regulations govern these other "student loans" specifically in the areas of how bankrupt, deceased, or disabled borrowers will be treated?

 

[I AM ALWAYS LIABLE]

http://www.carreonandassociates.com/sl.htm

 

[Cassy]

Non-federal, private credit based student loans

Thank you "I am always liable" for your quick response referencing the Carreon and Associates web site. I had previously read most of the information there, but re-read it looking for any reference to non-federal student loans and the laws that govern them. Either I am missing it or there is no reference to this particular type loan. Can you point me to a more specific entry at that site? I checked the various links, etc.

PS For anyone looking for information about federally insured/guaranteed student loans, direct or indirect, there is a wealth of information on the Carreon website.

 

[CarlBear]

Cassy,
I too am in a similar situation and would appreciate some further information on Student Loans.

I have one from a company that is supposed to be a private lender and want to include them in my Bankruptcy.

Good Luck

CB

 

[Cassy]

Private lender student loans

Hi CB,
You mention needing more information about student loans as you want to include a private lender in bankruptcy. My original question is more about private non-federal loans than private lenders. As you probably know private lenders make loans under a federal program called FFELP for Federal Family Education Loan Program. These loans are guaranteed/insured by guarantors that have an agreement with the Federal Government which protect the lender from substantial loss in the event of default. Of course private lenders also make non-federal "consumer loans for education" which also get generically referred to as student loans. It is these loans I am inquiring about.

The non-dischargebility of federal student loans became law because for a period of time several years ago students were graduating and immediately filing bankruptcy to discharge their loans. Recently, in 1998, another loop was closed by eliminating the language that allowed discharge if the loan had been in payment status for 7 years. The existing law requires the borrower to prove a stringent "undue hardship" to qualify for discharge. However, the law does provide for cancellation of student loans in the event of death or total and permanent disability of the borrower. 34CFR682.402 is very specific about how such loans will be handled. You can read about the different reasons Federal student loans can be cancelled at: http://www.ed.gov/offices/OSFAP/DCS/repay/cancel/

The new bankruptcy law currently stalled in the Senate seeks to amend Title 11 USC Sec. 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt -
(8) for 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 for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents;
TO INCLUDE `(B) any other educational loan that is a qualified education loan, as that term is defined in section 221(e)(1) of the Internal Revenue Code of 1986, incurred by an individual debtor;'. So even though makers of non-federal education loans have for years vigorously defended their non-dischargeability status it looks like until the new law only federal loans had such protection.

I don't know if this info helps in your decision. I am not an attorney and my interpretation is only my opinion - nothing that would hold up in court, for sure. http://www.ed.gov can be a good place to start looking though.
Good Luck to you as well!