11 USC 523(8)(A)(i) says that an educational loan funded by a non-profit is non-dischargeable except upon showing of undue hardship. However, it fails to define an educational loan. Obviously, loans made so one can attend a school of higher ed or trade school would be educational. Section 523(a)(8) excepts three types of education loans from discharge in bankruptcy: (a) loans made, insured, or guaranteed by a governmental unit, (b) loans made under any program funded by a governmental unit or nonprofit institution; and (c) loans that are “qualified education loans” as defined in 26 U.S.C. § 221(d)(1). A private loan does not fall under either of the first two categories of loans excepted from discharge under § 523(a)(8). (It is not an education loan made, insured, or guaranteed by a governmental unit, or made under any program funded in part by a governmental unit or nonprofit institution.) Consequently, a private loan is excepted from discharge under § 523(a)(8) only if it is a “qualified education loan” as defined in 26 U.S.C. § 221(d)(1).
A “qualified education loan” means any indebtedness incurred solely to pay “qualified higher education expenses.” 26 U.S.C. § 221(d)(1). ”Qualified higher education expenses” means the “cost of attendance” at an eligible educational institution. The “cost of attendance” means (a) tuition and fees normally assessed a student carrying the same academic workload, as determined by the institution (including costs of materials and supplies); (b) an allowance for books, supplies, transportation, and miscellaneous personal expenses; and (c) an allowance based on expenses reasonably incurred for room and board. (See section 472 of the Higher Education Act of 1965, 20 U.S.C. § 108711.) If a loan is incurred for purposes not permitted by the “cost of attendance,” it is not a qualified education loan for purposes of § 523(a)(8). Also, if an education loan exceeds the remaining cost of attendance, after deducting other aid received and expenses paid with funds from certain education-tax benefits, it is not a “qualified education loan.”
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