The Best List of Private Student Loans to Bankrupt

Mark Kantrowitz from Private Student Loans Guru recently wrote an article for Forbes – How To Bankrupt Your Student Loans.

The article is great but it contains the best list of private student loans that are not qualified education loans and should be able to be discharged in bankruptcy as I describe in this post.

Here is the list that is worth knowing that are ripe for bankruptcy discharge. Talk to your bankruptcy attorney about these loans if you have them.

Private Student Loans Ripe for Bankruptcy Discharge

  • Bar Study Loans and Residency and Relocation Loans are not qualified education loans because they are borrowed for expenses incurred after the student graduated and because the expenses are not qualified higher education expenses.
  • Continuing Education Loans and Career Training Loans are not qualified education loans because they are made to students who are not enrolled on at least a half-time basis. Also, for a student loan to be a qualified education loan, the student must be pursuing a degree or certificate or other recognized education credential at a college or university that is eligible for Title IV federal student aid. Continuing education students are not pursuing a degree or certificate.
  • K-12 Loans are not qualified education loans because the student cannot be enrolled in an elementary or secondary school. For similar reasons, loans made to dual enrollment students are not qualified education loans, since a dual enrollment student is enrolled simultaneously in a college and an elementary or secondary school.
  • Direct-to-Consumer Loans may be dischargeable because they are designed to permit borrowing beyond the college’s cost of attendance, as they are not school certified.
  • Mixed-Use Loans are not qualified education loans because they are not borrowed solely to pay for qualified higher education expenses. Examples of mixed-use loans include credit cards, auto loans, personal loans, home equity loans, home equity lines of credit and other types of mortgages (e.g., a cash-out refinance).
  • Retirement Plan Loans are not qualified education loans because such loans are excluded from the definition of a qualified education loan.
    Loans Made by Relatives are not qualified education loans because the debt is owed to someone who is related to the borrower. This includes loans owed to a brother or sister (whether by whole or half-blood), spouse, ancestor or lineal descendant.
  • Loans for Prior-Year Balances are not qualified education loans because they are not made within a reasonable period of time (90 days) before or after the qualified expenses are paid or incurred. This requirement does not apply to a refinance of a qualified education loan.
  • Loans for the Purchase of a Computer and Obtaining Professional Licenses or Certification are not qualified education loans because these expenses were added to the definition of cost of attendance after August 4, 1997. Room and board for less-than-half-time students was also added after this date, but those loans would also be non-qualified because the students are enrolled less than half-time.
  • Loans Made to the Student’s Grandparent, Aunt, Uncle, Niece, Nephew, Sibling, Cousin or Stranger are not qualified education loans, since the student must be the borrower, the borrower’s spouse or a dependent of the borrower.
  • Loans for Unaccredited Colleges or Universities are not qualified education loans because the loan must have been used to pay for qualified expenses at an eligible institution, which is defined as a college or university that is eligible for Title IV federal student aid.
    Loans for Foreign Colleges and Universities might not be qualified education loans, depending on the specific college or university, for similar reasons. Only about 400 foreign colleges and universities are eligible for Title IV federal student aid. – Source

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