Educational Credit Management Corporation

Educational Credit Management Corporation, a nonprofit organization that provides student loan services, has been involved in several lawsuits that establish new principles in lending law.

Educational Credit Management Corporation?

Educational Credit Management Corporation (ECMC) is a nonprofit corporation that provides services to students and lenders who participate in the Federal Family Educational Loan Program. ECMC guarantees student loans for private parties and is the designated guarantor of Stafford, PLUS, and Consolidation loans for the Commonwealth of Virginia and the State of Oregon.

ECMC also guarantees loans for many other agencies. When borrowers whose loans are guaranteed from 23 different guarantee agencies declare bankruptcy, these agencies transfer the bankrupt borrower's loan to ECMC for servicing. Due to Educational Credit Management Corporation's involvement in so much bankruptcy litigation, it has found itself as plaintiff or defendant in a number of lawsuits that have helped to form the legal landscape in the field of lending law.

Polland V. Educational Credit Management Corporation

In this Tenth Circuit case out of Kansas, the plaintiff, Ms. Polland, had entered a bankruptcy plan that disputed the amount and terms of her student loan. Her bankruptcy plan provided that, unless the student loan lender filed proof of the student loan with the bankruptcy court, the amount of the student loan would be included in the bankruptcy debts to be discharged, and Ms. Polland would no longer have to pay the student loans.

The lender – one of those 23 guarantee agencies, no doubt – failed to file a proof of claim as required by Ms. Polland's bankruptcy plan. The debt was later transferred to Educational Credit Management Corporation, and ECMC tried to collect the debt. Ms. Polland filed a legal action to declare that the debt had been discharged in her bankruptcy proceeding.

The Tenth Circuit Decision

The Tenth Circuit ruled that Ms. Polland had to pay the debt owed to Educational Credit Management Corporation for her student loans. The opinion stated that bankruptcy law allows student loans to be discharged under certain circumstances, including a showing by the debtor that paying the loan will be an "undue hardship."

The judge held that, even though Ms. Polland's bankruptcy plan had provided that the debt must be discharged unless a proof of claim was filed, she had not shown undue hardship in her bankruptcy documents. Without undue hardship, the law does not allow the debt to be discharged. Educational Credit Management Corporation won its lawsuit and appeal against Ms. Polland.