How do the Debtor’s Assets play a role in dischargeability of student loans and what types of student loans can be discharged?
We are continuing our series about student loan dischargability. The next potential inquiry by the Department of Education is whether the debtor’s assets must also be considered in the undue hardship analysis. The Department of Education should not consider assets that are not easily converted to cash, such as the debtor’s homestead or retirement account funds. Funds that are in a regular savings account or brokerage account maybe considered to determine your ability to repay your student loans. There is no bright line test in terms of how much money/assets would disqualify a person from getting a student loan discharge. It is taken in totality with other factors to be considered, such as your present and future ability to pay your loans.
The Department of Justice guidance is specific to Direct Loans (Federal student loan made directly by the U.S. Department of Education), not FFEL (Loans included in the FFEL program include Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and Consolidated Loans), Perkin Loans (A Perkins loan is a subsidized loan, meaning that the federal government pays the loan’s interest while you are in school) or private student loans.
If there is any question as to which loans are dischargeable or if you assets would be considered, it is best to consult with an attorney. In our next segment of the series we will be discussing when is a partial discharge possible, if the debtor is ineligible for a full discharge of their student loans.