HHM - More Student Loan Questions Please

[needinganswers]

Hi, HHM

I finally found a case quite similar to ours: Linda Lorraine Pilcher v. Hemar Service Corporation of America, Inc., Unfortunately, the case was reversed and remanded.

"We hold that the partial funding requirements for the applicability of 523(a)(8) is met; therefore we REVERSE the granting of summary judgment to Pilcher and the denial of summary judgment to HEMAR insurance. We REMAND for further proceedings on the issue of whether a hardship exists for purposes of 523(a)(8)."

The difference between our cases is that even though both private educational loans were based on credit worthiness and serviced through non--profit agencies on behalf of the lenders, Pilcher's loans were insured by a third party (HEMAR Insurance Corporation of America later sold to Student Loan Marketing Assn.), but ours was guaranteed by a co-signer. When it says insured does that mean guaranteed as well? I want to make sure I understand the meaning of these terms.

Pilcher's lender, Norwest Bank, argued that it would have been impossible for them to participate in the loan program had there not been a non profit guarantee agency such as Higher Education Assistance Foundation to fund the program. Without this substancial funding by HEAF, the educational loans available under the loan program would not have been available to students.

It make sense, but in our case, under the private loan program in which we belong it didn't require any funding from any non-profit agencies (none that I know of). The loans were provided by the bank which is sent to the non-profit servicing center, then to the school, then disbursed to us in check as needed. Although I understand that it's not about the specific loan, but the program as a whole is in question. My point is our lender could still have lent us the money even if they were not part of the loan program unlike Pilcher's case. Do I make sense?

My questions is this: is it possible that even though the guarantee of the loan is the co-signer, could the loan also be insured by a third party unknowingly? I don't see anything on the promisary note that says insured but only guaranteed by the co-signer.

Thank you again for all your help, HHM. I appreciate it very much.

[HHM]

I suppose its possible that your loan is insured, many loans are insured...but without actually reading the whole facts of the case you cited, I cannot really say one way or the other how this would effect your case.

In our common sense way of thinking, insuring a loan and gauranteeing a loan are practically the same as the net result is the same if there is a default, (i.e. the lender makes a claim to be paid to the insurer or guarantor). However, in this scenario, I think insurance and gaurantee are 2 different things. Your loan could still be insured in the back ground while still having a gaurantor (i.e. co-signer).

I suppose your risk is this, that if your lender offers these private student loans, but they are all insured by a thirdy party non-profit agency, then I think the lender has an argument that the loan is not discharagable. However, without doing more research, I think it is weak, because insurance is about loss mitigation for the lender.

It sounds like in the case you cited, that the loan funds were actually provided by another entity, that the bank did not front the money, so I think that is how the loans in that case were considered non-dischargable.

Personally, I think this would be an underhanded way of getting student loans non-dischargable by simply insuring them by a non-profit insurance company.

I still think you have a strong case.

[needinganswers]

If you could only read the promisary note there isn't anything in the note that says insured or guaranteed by any non-profit entities. Usually when you get a loan from the federal government, the promisary note has the word federal written all over it. Ours kept referring to me, the co-signer, the guarantee of the loan. If I were to apply directly to this bank based on my credit worthiness, then they would either deny or provide me the educational loan at a very high interest rate, of course. We probably didn't even have to apply through the shool financial aid. We still haven't heard from the bank. How long does it normally take for the other party to respond to a summon? We also never heard back from the servicing company. It seems that all these work are between us and the bank. Haven't heard or seen the insurer of our loan either. Am sure the bank has its own insurer. Is it possible for the bank to sell our loan to another party who is for non-profit? If so, we would have heard from this third party by now right? We haven't. It feels like a waiting game. Heck, I should be the assistant for my lawyer--doing the research on my own. Maybe I'd make more money becoming a paralegal. ( : Thanks so much for your help, HHM. We truly appreciate it.

[Charmony]

FYI. I had a reconsolidation student loan. Don't know what it means, but rec. a congratulations letter that said I was paid in full. I hope that helps a little. I know I was shocked and happy, was not expecting that.

[needinganswers]

(Re: FYI. I had a reconsolidation student loan. Don't know what it means, but rec. a congratulations letter that said I was paid in full. I hope that helps a little. I know I was shocked and happy, was not expecting that. )

That's great! That's wonderful! How did you manage to get the reconsolidation? What steps did you take?