Private Student Loan discharged on accident???

[CaliNative09]

Hi. This is my first post. My discharge was last month, 3/6/12. I've been paying on my private student loan through eloansecure.com of $172 per month. Last month on the 15th, I sent in my payment as usual. Since I haven't been receiving any statements, I've had to log in each month to make sure what my payment was.

However, today, I logged in....and I see ZERO BALANCE, all my payment/interest history is gone and I checked my credit report and the account says CLOSED with a ZERO BALANCE.

Could this be possible? Could the eloansecure people simply closed it by mistake? I'm afraid to call them to alert them to anything.

Can anyone advise me?

[HHM]

Could be a couple different explanations.

1. The loan was not really a student loan (not likely, but possible) and therefore it was discharged.
2. The servicer has returned the loan to the guarantee agency. Most likely, in the near future you will receive notices about the loan from a new entity. This outcome is somewhat common after BK.
3. I am sure the one you are hoping for, the computer screwed up and thinks the loan is discharged.

Try to stay on top of the situation, keep an eye on your mail and your credit report.

One fact that might help clear things up, did they return your payment? If not, then option 2 is most likely what is happening.

[CaliNative09]

Hi HHM,

The loan was through Citibank in 2005, and it was NON-certified -- not sure that matters, but I've been trying to research some and I can see it may fall into the exception -- as ZERO of the funds went directly to the school. I applied for credit, they sent me a $10,000 check.

I haven't received anything back, but it just cleared my bank a couple weeks ago.

Yes, of course I'm hoping for a "screw up", and also hoping since this was a "signature based, non-certified loan" that I may have a chance that it truly was discharged.

What do you think and thank you so much for your response.

[HHM]

Non-Certified simply means that the school does not need to certify that you are eligible for the loan. It doesn't mean the loan is not a student loan for BK purposes.

Only time will tell.

[KeithDoxen]

It's most likely HHM's #2 scenario. The guarantor of the loan was probably required to pay Citibank upon certain conditions, such as the borrower defaulting or declaring bankruptcy. This is extremely common among student loans issued by private banks. You will probably hear from the guarantor in the very near future.

[CaliNative09]

Well, it looks like my loan may have fallen into the "exception" as noted below, unless of course I'm misreading all of this. I recieved this loan in 2005....and no one has contacted me since early march when my BK was discharged...I guess we'll see, but I'm certainly hoping this is the case! I know that no banks even do non-certified signature loans anymore, at least from the research I've done...of course my Federal loans stand, but those are manageable payments.

The language in Section 472 of the Higher Education Act of 1965 (20 USC 1087ll)
requires cost of attendance to be "determined by the institution". While this doesn't
specifically require the education loan to be school certified, since the lender could
determine the cost of attendance from the institution's published student budget, any
amounts beyond the amounts in the student budget must be approved by the school in
advance. For example, while Section 472(2) of the Higher Education Act permits a
computer to be included in cost of attendance, the "as determined by the institution"
language provides the institution with the authority to determine whether or not the cost
of a computer is included in the cost of attendance. Most colleges do not include the cost
of a computer in the standard student budget, but instead have an appeals process for
adjusting the cost of attendance to include the actual cost of a computer subject to certain
limits, such as a reasonable cap on the cost and no more than one computer per
undergraduate career. If an education loan was incurred to pay for a computer without
the college approving an increase in the cost of attendance corresponding to the cost of
the computer, the loan is not a qualified education loan. Likewise, if an education loan is
incurred for purposes not permitted by the cost of attendance, it is not a qualified
education loan. For example, equipment must be required by the institution to be
considered part of the cost of attendance under section 472(1) of the Higher Education
Act of 1965. If an education loan is incurred to purchase a cell phone, iPod, calculator,
camera, PDA or other equipment that is not "required of all students in the same course
of study", the loan is not a qualified education loan. Similarly, although section 472(2) of
the Higher Education Act of 1965 includes "transportation" within the definition of cost
of attendance, this does not permit the purchase of an automobile or motorcycle. The
specific language is for "an allowance for ... transportation ... as determined by the
institution".
Thus an education loan which exceeds the remaining cost of attendance (after reducing it
by other aid received and expenses paid with funds from certain education tax benefits)
would not be considered a qualified education loan.

If an education loan fails to satisfy any of these requirements, it is not considered a qualified
education loan within the meaning of 11 USC 523(a)(8) and hence may be subject to discharge
in a bankruptcy proceeding.