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Student Aid Policy Analysis
Limitations on Exception to Discharge of Private Student Loans
August 19, 2007
Updated March 5, 2009
This document reviews the limitations on the exception to discharge of private student loans as
encoded in the US Bankruptcy Code (11 USC 523(a)(8)) as amended by section 220 of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), P.L. 109-8,
effective October 17, 2005.
These limitations stem from three aspects of the statute:
1. the definition of a "qualified education loan"
2. the nature of the association of the loan with a nonprofit institution
3. the exclusion for cases involving undue hardship
To be excepted from discharge, a debtor would either have to show that his or her education loan
was not a qualified education loan and was not funded by a nonprofit institution or that repaying
the loan would represent an undue hardship.
Qualified Education Loans
BAPCPA amended the US Bankruptcy Code to include "qualified education loans" within the
scope of the exception to discharge for education loans. Private student loans which are not
school certified generally do not satisfy the requirements to be considered a qualified education
loan. One must, however, review the specific circumstances of each loan to determine whether or
not it satisfies the requirements to be considered a qualified education loan.
The term "qualified education loan" is defined in 11 USC 523(a)(8)(B) by cross-reference to 26
USC 221(d)(1), which defines it in terms of other sections of the Internal Revenue Code of 1986
and the Higher Education Act of 1965, including definitions of "qualified higher education
expenses", "cost of attendance", "eligible educational institution" and "eligible student".
There are two major types of private student loans: those that are school certified and those that
are not school certified.
School certified loans generally satisfy the requirements of a "qualified