Is Your Student Loan Servicer Violating Your Bankruptcy Discharge?

The Consumer Financial Protection Bureau launched a lawsuit against student loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA), better known as American Education Services (AES).

AES illegally continued to collect student loans that had been discharged in bankruptcy. They also sent false information about consumers to credit reporting companies. The CFPB seeks to force AES to stop this illegal conduct, provide redress to harmed borrowers, and pay a civil penalty. 

It is extremely difficult to discharge federal and private student loans. If you’ve managed it, you shouldn’t have some company adding insult to injury by attempting to collect from you anyway. Yet, this seems to be a common practice among student loan servicers.

Some student loan types should not be difficult to discharge in bankruptcy at all. Some loans are marketed as student loans but are actually non-traditional direct-to-consumer loans. Unlike student loans, funds from direct-to-consumer loans are sent directly to the student to use. Usually, students use the money to pay bills. A direct-to-consumer loan should be fully discharged in bankruptcy like any other loan, but many servicers do their best to ignore this fact. 

Your loan may often be automatically discharged without a special hearing or procedure if:

  • Your loan was greater than the cost of attendance.
  • The loan was used to pay for an education at an unaccredited school or a school in a foreign country. 
  • The loan was for fees or expenses related to studying for a professional exam or used to cover the cost of board examinations or fees, moving, or living expenses for a medical or dental residency. 
  • If you were in school less than half-time. 

If you think your loan servicer is violating your discharge, you should:

  1. Save any and all documents you’ve received and note how much you’ve paid since the discharge if anything.
  2. Locate and save any documents related to the loan, like promissory notes or letters from the loan originator or servicer.
  3. Locate and save bankruptcy documents.
  4. Speak to an attorney, as you may have remedies available to you.

You may also report the loan servicer to the Consumer Protection Bureau.

If you are contemplating bankruptcy and are wondering whether it will be possible to discharge your student loan, schedule a free consultation with Haysom Law. We specialize in helping you get debt relief to the fullest extent allowed by the law and can help you strategize and understand your rights.

See also:

What Can You Do If Your Debt Collector Violates the FDCPA?

Your Rights Under the Fair Debt Collection Practices Act 

The Consequences of Collection Accounts in New York: Here’s What You Need to Know



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