The Worst Debt You Can Have: Student Loans

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The Worst Debt You Can Have: Student Loans

Post  Admin on Thu Jan 21, 2010 11:15 am

The Worst Debt You Can Have: Student Loans

There is one debt far worse than owing taxes, and that is student loans.

Student loans are one type of debt that is almost always non-dischargeable in bankruptcy.
Let’s look at what a student loan is and what it’s not. Section 523(a)(8) contains the so-called student loan exception to discharge. The exception applies to:

• 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 a nonprofit institution; or

• for an obligation to repay funds received as an educational benefit, scholarship or stipend; or

• any other education loan that is a qualified education loan, as defined in section 221(d)(1) of the federal tax code.

Congress added this third class of loans those qualified education loans as defined in section 221(d)(1) of the tax code in 2005. A qualified education loan means any debt incurred by a taxpayer solely to pay “qualified education expenses.

Qualified education expenses, in turn, are defined by yet other act, the Higher Education Act. To recap, we’ve gone from (1) the Bankruptcy Code to (2) the Tax Code to (3) the Higher Education Act.

In section 472 of the Higher Education Act, we arrive at exactly what qualified education expense means. And it turns out that it’s a lot of things, including:

• Tuition and fees

• Books, supplies, transportation, and personal expense

• Room and board

• Dependent care for children of the student

• Telecommunication expenses

• Expenses of being part of a work cooperative

These expenses must be incurred by eligible students and at eligible institutions. So, for example, a student without a high school diploma or GED would not be an eligible student and a non-accredited institution would not be an eligible institution. These limitations are so narrow, however, that they would only apply to a minute percentage of the student loans made.

The bottom line to all this: a student loan is almost any obligation of any type used for practically any educational purpose even a purpose only loosely connected to the student’s education expenses such as transportation costs and costs of dependent care.

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More on Student Loans

Post  Admin on Wed Apr 15, 2015 10:37 am

Arizona residents who are struggling with student loan debt may be interested in one way to get that debt wiped away. Depending on the type of student loan and what it was used for, discharge may be possible.

There is a common notion that private student loans cannot be discharged through bankruptcy. However, there are a number of situations that would allow a person to have these debts forgiven. This is because the schools or the expenditures themselves fail to meet certain definitions that protect the loans from discharge.

For instance, a Chapter 7 bankruptcy will discharge private loans for a student who did not attend an accredited school. This usually applies to those who went to a vocational school, financed by private loans. Experts note that there are other types of programs that are funded by private student loans, including drug treatment facilities, which would also qualify for discharge. However, even when a school is accredited, they must have been offering federal loans alongside the private loans, or else the loans still may not qualify for protection against discharge.

A "qualified higher education expense" usually includes such things as tuition and books that are required for attending the program. If the loan money was spent on other things, however, this can allow that portion of the loan to be forgiven.

Parts taken from the original Twitter post found at: http://www.dgtucson.com/blog/2015/04/bankruptcy-discharge-for-private-student-loan-debt.shtml?utm_medium=twitter&utm_source=twitterfeed

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