The 7 requirements for a loan to be a “qualified education loan” to be non-dischargeable in bankruptcy:
In order for a “student loan” to be non-dischargeable in bankruptcy, it must meet the following 7 requirements to be a “qualified education loan”:
1) The loan must have been incurred by an individual borrower. Loans incurred on behalf of a business or other organization do not meet this requirement.
2) The loan must have been issued solely for the purpose of paying higher education expenses. This means credit cards and home equity lines may still be dischargeable, even if they were used to pay for tuition or other education expenses.
3) The student who obtained the loan must have been the person filing bankruptcy, the person’s spouse, or a dependent of the person filing bankruptcy.
4) The loan must have been issued within 90 days before or after the academic period for which the funds were applied. This means that if a student loan was issued more than 90 days before or after the beginning of the academic semester for which it was used, it may be dischargeable, even if it was labeled as a “student loan.”
5) The loan must have been incurred while the student was enrolled at least half-time in a Title IV educational institution for the purpose of seeking a degree. A Title IV institution is a school that has a written agreement with the US Secretary of Education, which allows the school to participate in federal student financial assistance programs. For a list of all Title IV schools, click here.
6) The student loan must not be owed to a relative or borrowed from a retirement plan.
7) The student loan must be used to pay “qualified higher education expenses.” The official definition of “qualified higher education expenses” can be found here. But generally, these expenses include tuition, books, supplies, room and board, transportation, and a reasonable allowance for miscellaneous personal expenses.
Thus, if a purported student loan does not meet ALL of these requirements, it is not a “qualified education loan” within the meaning of the Bankruptcy Code, and thus, it may be dischargeable in bankruptcy.