Is it a student loan?

[waltercheryl]

Here is the situation:
James goes to a "college" to become a med assistant. After getting approved for fianancial aid which is used at school A for a semester, he transferred from school A to school B. After seven months at school B, he quits. He later files bankruptcy and listed all student loans which he knows are not dischareagble.

James knows that he owes the bank which issued the student loan. However, it is School B which is seeking to collect unpaid "student loans" from James.

This is what School B wrote to James (redacted):

When you started with us in July of 2008, you were in a current loan term with School A. This limited the amount of aid (loans) you could receive at our college. Fortunately, based on your Financial Aid package, you were still covered in the program through graduation with Federal Aid (both loans and grants; you did not require a monthly payment to the school). However, since you attended only 7 months of the program, you were only eligible for a portion of that portion of aid. The breakdown is as follows:

Tuition for Award Year 1 (7/14/08 – 08/11/2009) = $9786
Transfer Credit for Med Term 1 = (1143)
Book Charge = $ 560
Registration Fee = $ 55
Total cost for Award Year 1 = $9258

Eligible Aid during the time you attended:
Subsidized Loan (Bank A) = $ 866.25 (you are responsible to repay this amount)
Unsubsidized Loan (Bank A) = $1858.72 (you are responsible to repay this amount)
PELL Grant (free money) = $2366
SEOG Grant (free money) = $ 190
Total Aid received and eligible to be kept = $5280.97

Difference not covered by FA during enrollment = $3977.03

This is the balance that was due on the account upon dropping from the college in February 2009. Beginning in March, we sent numerous letters and e-mails to you monthly. Finally in June, we had to send your balance to our collection agency as you made no attempt to contact us concerning this balance and made no attempt at payment. At this point, since this balance was sent to full collections, it is subject to the collection fees. The total amount due on this balance to our collection agency is $5302.71. This balance, along with your loans with us ($2895) is the total amount due for your time enrolled with our campus. The $2895 is now due to Bank A and the $5302.71 is due to XYZ Collection Agency.

In June of 2009, we received a letter stating that you had declared “bankruptcy” in the District Court of Maryland. As I am sure you are now aware, any educational loans or balances that are owed to lenders or schools cannot be included in bankruptcy proceedings. Regardless of any court proceedings, these are the balances you owe.
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Question: Does James owe school B? I thought student loans are used to pay the school and then the borrower is obligated to pay the lender who paid the school.
Question: If James owes school B, is it a student loan?
Question: Because I quit the school after seven months, could it be that they never received the financial aid I was awarded and thus are seeking to get it from me under the guise of a student loan obligation?
Questions: The letter stated "any educational loans or balances that are owed to lenders or schools cannot be included in bankruptcy proceedings. Regardless of any court proceedings, these are the balances you owe." Is that true as it relates to balances owed to schools cannot be included in bankruptcy or more to the point discharged. What makes a balance owed to a school a student loan?

Bottom line: If it is not a student loan, then the debt is dischargeable. What does James need to ask the school in order to detrmine if he is obligated to pay the school?

Thank you in advance for all insightful responses.

[stratos]

Per the NCLC bk guide, a debt to a school is not necessarily a student loan. If he didn't take out apply for and sign a loan agreement with the school, I would strongly doubt he has a student loan with that entity. He could file a motion to determine dischargeability.

[butterfly_doll]

I am no expert, but I have a related issue where the college that I went to says I owe unpaid tuition and health center charges. No, I do not think that it is a student loan. I do not see how anything that you did not sign loan papers for could be a loan.

It is a really good idea to ask the school to "validate the debt" anyway. That means they need to produce a copy of what ever documents that the student signed (then you can get a better idea of what kind of debt this really is).

F.Y.I. When I called the collection agency that the school had hired and talked to the supervisor there, I was very polite and asked him to please validate the debt. He asked where to send this info when he got it. I gave him an address but I guess they couldn't produce it, so the collection agency left me alone! I haven't heard from them in over a year. The college however, is still withholding transcripts. My attorney did list the debt to the school on my petition. We'll see what happens...

Here are some links sort of related to this subject (they are more about schools trying to get payment by withholding transcripts after someone has filed bankruptcy so it's stuff I looked up for my situation) but there might be some info in here that YOU find helpful as well >>>>

http://www.ehow.com/facts_7331172_file-bankruptcy-school-release-transcripts_.html

This one refers to a case in which the school debt was discharged in BK-> http://www.jsonline.com/blogs/news/43443492.html

This one says, "Most of us know that student loans are nearly impossible to discharge; but school tuition is not typically considered a student loan and can be discharged during bankruptcy." -> http://www.allmandandlee.com/bankrup...tcy-discharge/