Big News: When Is A Tuition Debt A Student Loan Or A Contract?

Big News: When Is A Tuition Debt A Student Loan Or A Contract?

The difference is very important to many of us who have private loans.  Most recently, Judge Elisabeth Stong of the Eastern District of New York questioned if the Debtor had a “debt” to repay a college tuition  Harris EDNY BK 13-47320 ( which is dischargeable in bankruptcy court) or an educational loan ( which is not dischargeable in bankruptcy without an adversary proceeding).  The case involves a debtor that received employer reimbursement to take college classes at Brookline College.  The college had the client sign a Tuition Plan Payment Contract (attached).  The contract provided that the student would pay for the “processing loan” and that the student would be responsible for the payment of any balance.  But the contract does not refer or allow for any  “loan” attached to the contract.  Additionally, the only loans shown on the one page contract is for Stafford subsidized and unsubsidized  loan, no promissory loan or note to the college.  Many students sign tuition plans payments, but a contract to pay tuition is NOT the same as an educational loan.  Contractual obligations to repay a debt (tuition) may be dischargeable if it is not a student loan.

 

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