Do I Have a Good Case for Eliminating My Private Student Loan Debt?


Dear Steve,

I am interested in pursuing bankruptcy for my private student loans. While this is usually a futile battle, documentation from the research I have done will make my claim valid.

I have $41000 in debt to ACS, and I have $111000 in debt to Navient (Sallie Mae). Only about $30,000 of that money ($152,000) was actually used for tuition ($4000 per semester for 6 semesters).

The remaining monies went to things that were not eligible education expenses. My father had recently passed away, and I paid, with the “loan” money, over $65,000 in bills and medical expense for my mother in relation to my father’s death.

Also, because my mother was unable to work, we used the remainder ($57,000) for living expenses, travels expenses and other miscellaneous expenses both related and unrelated to my going to school full time.

I believe, based on the literature below from your site, that I have a great case for dismissal for all but the $30000 that was actually used towards my school tuition, books and room and board.

Please let me know if this is a valid case. Any help or advice would be greatly appreciated!



Dear Vickie,

I believe you are referring to the information from my article These Private Student Loans Can Be Easily Discharged in Bankruptcy.

And it is true that private student loan money that was not used for a “qualified educational expense” would not be protected in a consumer bankruptcy. It would be dischargeable in your bankruptcy.

Lenders passed out all sorts of money to people that was never used for “student loans” and they hoped people would think the money was not dischargeable through bankruptcy.

The big question is why would the lenders do this? The only logical answer is they hoped to get people more in debt than they actually needed to be. Otherwise, the very smart people at the lenders would have known this was an issue and then made a great effort to not pass out unprotected money. But as you can see, they don’t seem to mind how you use the money.

See also  My Student Loans Were Discharged in Bankruptcy But They Are Trying to Collect

You will of course need to hire a consumer bankruptcy attorney who is licensed to practice in your state and discuss these issues with them.

Just on face value, if you can document and show the money was not used for “qualified educational expenses” you should have an excellent shot of having that part of your student loan debt discharged.

However, don’t be surprised if the lender pushes back a bit. Sometimes they do and sometimes they don’t.


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Steve Rhode

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