§ 159.6     Student Loans: § 523(a)(8)
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 159.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Student loans described in § 523(a)(8) are nondischargeable at the completion of payments under § 1328(a) and have been for many years.1 BAPCPA did not change the cross-reference to § 523(a)(8) in § 1328(a), but BAPCPA did materially modify § 523(a)(8) in ways that will affect the dischargeability of student loans in Chapter 13 cases.

[2]

As amended by BAPCPA, discharge at the completion of payments under a Chapter 13 plan does not discharge a student loan:

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.2
[3]

There are two changes in new § 523(a)(8), one clearly important and the other of uncertain content. Under prior law, a student loan was nondischargeable unless excepting the debt from discharge “will” impose an undue hardship on the debtor and the debtor’s dependents. BAPCPA reworded § 523(a)(8) to except a student loan from discharge unless excepting the debt from discharge “would” impose an undue hardship on the debtor and the debtor’s dependents. It is not clear what this change in wording signals. “Will” is perhaps a slightly higher standard of certainty than “would.”

[4]

The second BAPCPA change to § 523(a)(8) is clearer. The kinds of debts that are excepted from discharge by § 523(a)(8) now extend to educational loans that qualify under the Internal Revenue Code without regard to the source of the loan. In other words, qualifying educational loans from for-profit, nongovernmental entities and institutions can now qualify as nondischargeable debts under § 523(a)(8). This is likely to expand the universe of potentially nondischargeable educational loans in Chapter 13 cases. For-profit schools for everything from truck driving to hair dressing may qualify if their loans fit the definition in § 221(d)(1) of the Internal Revenue Code of 1986.


 

1  See § 346.1 [ Student Loans ] § 158.2  Student Loans.

 

2  11 U.S.C. § 523(a)(8).