§ 88.6 — Student Loans

Revised: July 8, 2004

[1]

Prior to the 1990 amendments, student loans were dischargeable in Chapter 13 cases after completion of all payments under § 1328(a).1 Prior to 1990, student loans were like the “fraud” exceptions to discharge in § 523(a)(2), (a)(4) and (a)(6)—nondischargeable in individual Chapter 7, 11 and 12 cases but dischargeable in Chapter 13 if the debtor completed payments under the plan.2

[2]

Prior to 1990, an enormous body of case law developed addressing the question whether the good-faith test in § 1325(a)(3) prohibited confirmation of a plan that proposed to pay less than 100 percent of a student loan that would be nondischargeable in a Chapter 7 case.3 To prevent an objection to confirmation, Chapter 13 debtors sometimes separately classified student loans for more favorable treatment than other unsecured claim holders. The reported decisions were in disagreement whether favorable classification of a dischargeable student loan was fair discrimination under § 1322(b)(1).4

[3]

One of the pre-1990 cases allowing the separate classification of student loans found justification for the discrimination in the fact that the debtor intended to return to school and earn a degree at the institution to which the debtor owed the student loan.5 The courts refusing separate classification of student loans before the 1990 amendments typically reasoned that student loans were ordinary, dischargeable debts in a Chapter 13 case.6

[4]

In 1990, Congress raised the stakes for Chapter 13 debtors seeking favorable classification for student loans. The Omnibus Budget Reconciliation Act of 19907 amended § 1328(a)(2) to except from discharge at the completion of payments under a Chapter 13 plan student loans described in § 523(a)(8). The 1990 amendments were not neatly done and created many interesting issues for the discharge of student loans in Chapter 13 cases.8

[5]

After the 1990 amendments, most Chapter 13 debtors cannot discharge student loans unless the plan proposes full payment. If the debtor is not financially able to pay all unsecured claims in full, then the debtor will be advantaged to separately classify the student loan for payment in full.

[6]

Most student loan contracts include an entitlement to interest on the unpaid balance. After the 1990 amendments, if the debtor cannot pay the student loan in full through the plan, the nondischargeable debt that follows the debtor after the completion of payments to other creditors includes all the interest that accumulates during and after payments under the plan.9 If the plan can separately classify the student loan for payment in full with contract interest, the debtor will emerge from the Chapter 13 case with a complete discharge of personal liability.

[7]

A plan provision for the separate classification of student loans for payment in full with postpetition interest is likely to draw objections to confirmation from other unsecured creditors that are not being paid postpetition interest. 11 U.S.C. § 502(b)(2) prohibits the allowance of a claim for unmatured interest. It has been argued persuasively that it is unfair discrimination to pay postpetition interest to a student loan claim holder, at least during the initial three years of the plan.10 Debtors must win the argument that postpetition interest is not forbidden by the Code; § 502(b)(2) only disallows unmatured interest as part of the student loan claim.

[8]

Only a handful of decisions reported since 1990 permit a Chapter 13 debtor to separately classify student loans for more favorable treatment than other unsecured claims. One court acknowledged that after the 1990 amendments, “the Chapter 13 debtor will nearly always have a valid interest in giving educational loans special treatment because the educational loan creditor will . . . always have recourse against the debtor.”11 Another court applied the four-factor test12 to conclude that it was not unfair discrimination to separately classify a nondischargeable student loan for payment in full when other unsecured claims would be paid 100 percent after the student loan.13 This court found support for the separate classification of the nondischargeable student loan in § 1322(b)(4), which permits a Chapter 13 debtor to make payments on any unsecured claim concurrently with payments on any other unsecured claim.14 Another court confirmed a 48-month plan that separately classified student loans for 100 percent payment and a 29 percent dividend to other unsecured claims based on findings that 29 percent was substantially more than unsecured claim holders would receive in a liquidation under Chapter 7, the debtors voluntarily extended the plan to four years to raise the dividend, and without the discrimination, the debtor could not pay the student loans in full and would not realize the fresh start that Congress intended.15 In dicta, in a decision later reversed on other grounds, one bankruptcy court recited: “[I]t is well established that Chapter 13 debtors may separately classify student loan debts which are nondischargeable under § 523(a)(8). Any balance remaining on the loan at the conclusion of the plan survives the Chapter 13 discharge.”16

[9]

Several reported decisions—some allowing the separate classification of student loans and some not—have cited § 1322(b)(5) as an acceptable special treatment for student loans. As discussed elsewhere,17 11 U.S.C. § 1322(b)(5) permits a Chapter 13 plan to cure default and maintain payments on “long-term” unsecured debts. For this purpose, long-term means that the last payment is due on the student loan after the date on which the final payment under the proposed plan is due. Many student loans have extended repayment periods that would allow the use of curing default under § 1322(b)(5). Courts have held that separate classification of long-term student loans to cure default and maintain payments under § 1322(b)(5) does not unfairly discriminate.18 Several decisions rejecting other proposed separate classifications of student loans have observed that the debtor had the “more fairly” discriminatory alternative of curing default and maintaining payments under § 1322(b)(5).19

[10]

Separate classification of long-term student loans for treatment under § 1322(b)(5) is a mixed bag for debtors and creditors. Other unsecured claim holders can be expected to object when the use of § 1322(b)(5) will pay unmatured postpetition interest on the student loan or when the separate classification will pay a greater percentage of the student loan than will be paid to other unsecured claim holders.20 Curing default and maintaining payments under § 1322(b)(5) may forfeit the debtor’s right to later assert that discharge of the student loan is appropriate under the “undue hardship” standard in § 523(a)(8)(B).21 In the face of a trend disfavoring the separate classification of student loans in Chapter 13 cases,22 the debtor’s best position may be long-term treatment under § 1322(b)(5), but this choice is not without problems.

[11]

A clever but controversial classification of student loans terraces payments: pro rata to all unsecured creditors during the first 36 months of the plan, then elevated in favor of the student loans for the remaining months. Citing the disposable income test in § 1325(b)23 for the proposition that “a general unsecured creditor has a right to expect no more than three years of debtor’s disposable income being used to fund a plan,” the bankruptcy court in In re Strickland24 stated the following rule allowing the favorable classification of nondischargeable student loans:

It will be this court’s policy to allow nondischargeable student loans to be paid as a general unsecured creditor on a pro rata basis for the first 36 months of the plan. The remaining 24 months of the plan may be devoted solely to the payment of the student loan.25
[12]

Other reported decisions are critical of the Strickland approach. In In re Taylor,26 the debtor proposed to pay all unsecured claims, including a nondischargeable student loan, 34.56 percent during the first 36 months of the plan. After 36 months, the plan would extend an additional seven months, or as long as necessary, to permit the debtor to pay the nondischargeable student loan in full. Debtor’s counsel argued that the additional seven months were necessary to permit payment of the student loan in full under protection of the automatic stay, without interest. Finding the proposed classification to be unfair discrimination, the bankruptcy court stated “a ‘bright line’ should be drawn to prohibit in a Chapter 13 plan, any discrimination in favor of nondischargeable student loan obligations over other unsecured creditors.”27

[13]

It is not obviously unfair for a Chapter 13 debtor to classify a student loan for more favorable treatment after 36 months of equal payments to all unsecured claims. In several sections of Chapter 13, Congress has demonstrated intent that Chapter 13 debtors make payments to creditors for a basic period of 36 months. The disposable income test in § 1325(b) mandates 36 months of payments in most Chapter 13 cases.28 A Chapter 13 debtor is not permitted to make payments for longer than 36 months without showing cause under § 1322(d).29 If the debtor has satisfied the best-interests-of-creditors test,30 all the economic tests for confirmation can be satisfied in the typical Chapter 13 case during the first 36 months of the plan. A Chapter 13 debtor is under no compulsion to provide for a longer plan.31

[14]

If a debtor volunteers to make payments after 36 months, what is unfair about allocating a greater share of those additional payments toward a student loan that will otherwise remain the debtor’s personal liability? The fairness test in § 1322(b)(1) necessarily includes considering that the entitlements of unsecured creditors change after three years of payments. After the initial 36 months, the unfair-discrimination test for separate classification flexes in favor of a debtor’s reasonable interest in completing payment of a nondischargeable debt. Had Congress intended a bright-line test prohibiting all favorable classifications of student loans, it would have done something more than just amend the discharge provisions in § 1328(a).32

[15]

The handful of cases allowing favorable classifications of student loans on one theory or another can’t obscure that a strong majority of decisions reported since the 1990 amendments hold that it is unfair discrimination to separately classify educational loans for more favorable treatment.33 Many of these courts hold that nondischargeability is not alone a reasonable basis for favoring student loans over other unsecured claims.34 One court reasoned that because the student loan can be collected from the debtor after the completion of payments to other creditors, it is unfair to further favor the student loan by paying it more during the Chapter 13 case.35 Another court observed that allowing a Chapter 13 plan to pay a nondischargeable student loan in full while paying the general unsecureds only 10 percent would have the effect of

equitably subordinating 90% of the claims of those creditors holding dischargeable claims. . . . [T]he result would clearly be unfair. . . . [E]quitable subordination requires wrongdoing by the creditor whose claim is to be equitably subordinated. . . . There is no suggestion here that the debtor’s creditors holding claims dischargeable in Chapter 13 have been guilty of any wrongdoing that would justify the subordination of their claims to those of holders of nondischargeable claims.36
[16]

Several of these courts have rejected the debtor’s argument by analogy to the cases allowing separate classification of nondischargeable alimony and support claims. Alimony, maintenance and support described in § 523(a)(5) have always been nondischargeable in Chapter 13 cases.37 After the 1990 amendments, debtors have argued that student loans should be viewed similarly to support claims for purposes of the unfair-discrimination test in § 1322(b)(1). One court rejected the analogy, observing, “It would be virtually impossible to propose a successful Chapter 13 plan, which did not provide for payment in full of alimony, support, or maintenance. . . . There is nothing to suggest that nonpayment of student loans would make it impossible for the debtor to complete a Chapter 13 plan.”38 Another court found that the 1990 amendment to § 1328(a)(2) was indicative only that Congress intended Chapter 13 debtors to repay their student loans—the 1990 amendment “does not evidence a position as favored in public policy as are alimony and child support payments.”39 This perspective is enhanced by the 1994 amendment to § 507(a)(7)—now that Congress has defined most alimony, maintenance and support as priority debts entitled to full payment in Chapter 13 cases, it is more difficult to argue that student loans have similar status for purposes of separate classification.40

[17]

The Eighth Circuit was the first court of appeals to directly address separate classification of educational loans through a Chapter 13 plan. In Groves v. LaBarge (In re Groves),41 the plan proposed 100 percent payment of student loans and between 10 percent and 40 percent for other unsecured claim holders. The Eighth Circuit rejected the arguments in favor of separate classification in language that would preclude separate classification of student loans except when the debtor is unable otherwise to complete a plan:

With respect to student loan obligations . . . public policy does not dictate full payment of such debts during the life of the plan. Thus, there is nothing to stop a debtor from carrying out a Chapter 13 plan without separate classification of these claims. The debtor need only formulate a plan which pays student loan debtors [sic] pro rata with other unsecured creditors during the life of the plan as a continuing obligation thereafter. Alternatively, the debtor may treat the student loan obligation as a long term indebtedness under § 1322(b)(5), curing arrearages within a reasonable time and thereafter maintaining regular payments. While such plan treatment may result in the debtor emerging from his Chapter 13 plan with a continuing obligation which may impede the debtor’s fresh financial start, such an imposition may be the result envisioned by Congress in amending § 1328(a)(2) to make student loans nondischargeable in a Chapter 13 case. . . . Absent a showing that discriminatory treatment is necessary for the debtor to complete his Chapter 13 plan, separate classification of student loan and general unsecured obligations cannot be permitted under the Bankruptcy Code. . . . [T]he nondischargeability of student loan claims, by itself, does not justify substantial discrimination against other, dischargeable unsecured claims in a Chapter 13 plan.42
[18]

Groves is representative of the trend disfavoring the separate classification of student loans in Chapter 13 cases. Except for the few cases discussed above permitting long-term treatment under § 1322(b)(5) and the longer shot of convincing a court to allow favored treatment after three years of payments, there is little encouragement for separate classification of student loans. Chapter 13 debtors cannot count on separate classification to manage the nondischargeability of student loans or the nondischargeable, postpetition interest that accrues during the Chapter 13 case.


 

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

 

2  See § 344.1 [ Broadest Discharge Available ] § 157.1  Broadest Discharge Available.

 

3  See § 186.1 [ Student Loans ] § 106.4  Student Loans.

 

4  See In re Cronk, 131 B.R. 710 (Bankr. S.D. Iowa 1990) (It is unfair discrimination to pay educational loans 40% and 8% to other unsecured claim holders.); In re Lawson, 93 B.R. 979, 990 (Bankr. N.D. Ill. 1988) (Court denies confirmation of amended plan proposing to pay student loans in full and 10% to other unsecured claim holders: “a plan proposing to pay [all] unsecured creditors on a pro rata basis would not have been in bad faith. . . . [A]ccordingly, [the debtor] had no interest in making disproportionately large payments to the [student loan creditor]. The discrimination . . . is thus unfair.”); In re Freshley, 69 B.R. 96 (Bankr. N.D. Ga. 1987) (Applying four-part test of In re Gibson, 45 B.R. 783 (Bankr. N.D. Ga. 1985), and AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), it is not unfair discrimination to pay 100% of student loan and 1% of other unsecured claims when debtor desires to return to school and earn a degree. Congress has favored special treatment of student loans in § 523(a)(8).); In re Geehan, 59 B.R. 600 (Bankr. S.D. Ohio 1986) (In a case proposing to pay 10% to unsecured claim holders, court instructs debtor to separately classify student loan that would be nondischargeable in a Chapter 7 case and to provide for curing of the arrearages and payment of the regular monthly payments due on the student loan during the life of the plan.).

 

5  In re Freshley, 69 B.R. 96 (Bankr. N.D. Ga. 1987).

 

6  See, e.g., In re Lawson, 93 B.R. 979 (Bankr. N.D. Ill. 1988).

 

7  Pub. L. No. 101-508, 104 Stat. 1388 (Nov. 5, 1990).

 

8  See § 346.1 [ Student Loans ] § 158.2  Student Loans. Now just a footnote to bankruptcy history, the 1990 amendments contained a curious provision for the sunset of the subtitle that rendered educational loans nondischargeable in Chapter 13 cases. Section 3008 of Pub. L. No. 101-508, 104 Stat. 1388, stated: “The amendments made by this subtitle shall cease to be effective on October 1, 1996.” Had this sunset provision not been rescinded by later congressional action, the exception to discharge for educational loans in Chapter 13 cases would have expired on October 1, 1996. Unfortunately for debtors, the sunset provision was quietly repealed effective October 1, 1992, by § 1558 of the Higher Education Act of 1992. Pub. L. No. 102-325, § 1558, 106 Stat. 458 (1992) (“Section 3008 of the Omnibus Budget Reconciliation Act of 1990 is repealed.”).

    Because Chapter 13 cases last up to five years, many debtors in cases filed after the 1990 enactment of the student loan exception to discharge (November 5, 1990) and before the repeal of the sunset provision (October 1, 1992) would become eligible for discharge after the sunset date (October 1, 1996). For example, in a Chapter 13 case filed in early 1992 in which the length of the plan was the maximum five years, the debtor with a student loan would become eligible for discharge after October 1, 1996, the date on which the exception to discharge for student loans would sunset but for the repealing legislation in 1992.

    It is held by some courts that the dischargeability of debts is determined by the law in effect at the time a bankruptcy case is filed. See § 346.1 [ Student Loans ] § 158.2  Student Loans. In Chapter 13 cases filed after November 5, 1990, and before October 1, 1992, a Chapter 13 debtor’s decision whether to separately classify educational loans, and how favorably to treat them, was impacted by the law in effect at filing—including that such loans would become dischargeable again on October 1, 1996. It is hard to say how many Chapter 13 debtors bet on the sunset by failing to separately classify student loans for more favorable treatment.

    One reported Chapter 13 decision directly discussing the discharge of student loans in a case filed between November 5, 1990, and October 1, 1992, concluded that the sunset provision was not part of the discharge when the debtor completed payments in 1997. See In re Loving, 269 B.R. 655, 659–63 (Bankr. S.D. Ind. 2001) (“In 1990 . . . Congress amended § 1328(a)(2) of the Code to render [student loans described in § 523(a)(8)] nondischargeable . . . . The legislation also contained a ‘sunset provision’ which provided that the amendment to § 1328(a)(2) would expire on October 1, 1996. . . . However, on July 23, 1992, Congress repealed the sunset provision effective October 1, 1992. . . . Loving maintains that she should enjoy the benefits of the sunset provision, i.e., the discharge of her debt to ECMC, because the provision had not yet been repealed as of the Petition Date. The Court disagrees with Loving’s assumption that the sunset provision substantively defined the effect of a Chapter 13 discharge simply by being included in the 1990 amendment. When Congress amended § 1328(a)(2) to eliminate the dischargeability of those student loans described in § 523(a)(8), it explicitly stated that the amendment was to apply only to cases filed after November 5, 1990, per the sunset provision, Congress further provided that the amendment was to expire, i.e., that the superdischarge be reinstated, on October 1, 1996 . . . . According to Loving’s argument, only those cases both filed and discharged before October 1, 1996 would be adversely affected by the amendment to § 1328(a). However, if Congress had intended such a result, it would have explicitly stated so. The more logical interpretation is that Congress intended the amendment to § 1328(a)(2) to apply to any case filed between November 5, 1990 and October 1, 1996 regardless of when the debtor became eligible for discharge.”). See also Pearson v. United States Dep’t of Educ. (In re Pearson), 279 B.R. 612, 614–17 (Bankr. M.D. Ga. 2002) (On remand, form discharge order that mistakenly discharged student loans was void because the debtor did not bring an adversary proceeding and the student loan creditor did not have due process. “The Court’s discharge order did not reflect a change in the Bankruptcy Code that was applicable to Plaintiff’s Chapter 13 case. . . . Congress amended section 1328(a)(2) of the Bankruptcy Code, effective November 5, 1990, to provide that most student loans would be nondischargeable in Chapter 13 cases in which the discharges were granted prior to October 1, 1996. Under the ‘sunset’ provision of the amendment, student loans would be dischargeable in Chapter 13 cases in which the discharge order was entered on or after October 1, 1996. Congress repealed the ‘sunset’ provision on July 23, 1992. . . . The Court used a ‘form discharge order’ to grant Plaintiff’s discharge on January 15, 1997. The discharge order was provided to the Court by the Administrative Office of the United States Courts. The Administrative Office did not timely change the discharge order to reflect the repeal of the sunset provision. Thus, the discharge order provided that Plaintiff’s student loan obligation was discharged. . . . Plaintiff did not file an adversary proceeding to determine if repayment of her student loan would be an undue hardship. Thus, Defendant had no notice prior to entry of the discharge order that Plaintiff’s student loan would be discharged. . . . [T]he Court’s discharge order is void as to Defendant because Defendant did not have notice and a meaningful opportunity to be heard prior to the discharge of Plaintiff’s student loan.”).

 

9  See § 346.1 [ Student Loans ] § 158.2  Student Loans. See, e.g., Leeper v. Pennsylvania Higher Educ. Assistance Agency, 49 F.3d 98 (3d Cir. 1995) (Applying Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964), unmatured postpetition interest on a nondischargeable student loan is not allowable and survives discharge in a Chapter 13 case.); In re Hamilton, 179 B.R. 749 (Bankr. S.D. Ga. 1995) (Balance of student loan will be nondischargeable at the completion of payments under Chapter 13 plan notwithstanding that Department of Education failed to timely file a proof of claim and the debtor filed a proof of claim on behalf of the Department in an amount disputed by the Department.); Ridder v. Great Lakes Higher Educ. Corp. (In re Ridder), 171 B.R. 345, 346–47 (Bankr. W.D. Wis. 1994) (“Although claims for postpetition interest are disallowed during bankruptcy, after bankruptcy the holder of a nondischargeable debt may collect from the debtor personally. Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964). Student loans are nondischargeable in a Chapter 13 bankruptcy. . . . Because the debt was not discharged, Great Lakes may collect the postpetition interest from [the debtor] personally. . . . The fact that Great Lakes’ claim for postpetition interest would have been disallowed has nothing to do with whether postpetition interest is dischargeable.”); In re Shelbayah, 165 B.R. 332 (Bankr. N.D. Ga. 1994) (Unmatured postpetition interest on a student loan is not an allowable claim under § 502(b)(2), and such interest continues to accrue during the Chapter 13 case. All unmatured postpetition interest will have the same nondischargeable character as the underlying student loan under § 1328(a).).

 

10  See below in this section and see §§ 155.2 [ Long-Term Debts ] § 88.9  Long-Term Debts, 159.1 [ A Proposal: Simpler Rules for Classification of Unsecured Claims ] § 89.10  A Proposal: Simpler Rules for Classification of Unsecured Claims and 346.1 [ Student Loans ] § 158.2  Student Loans. See, e.g., In re Williams, 253 B.R. 220, 232 (Bankr. W.D. Tenn. 2000) (“This judge will not confirm Chapter 13 plans that provide for the payment of interest to student loan creditors, but not to other unsecured creditors.”); In re Shelbayah, 165 B.R. 332, 337 (Bankr. N.D. Ga. 1994) (Unmatured postpetition interest on a student loan is not allowable in a Chapter 13 case under § 502(b)(2), such interest continues to accrue during the Chapter 13 case, and the accruing interest has the same nondischargeable character as the underlying student loan under § 1328(a). The effect of disallowance under § 502(b)(2) “is to insure that creditors other than [the creditor holding the student loan] receive their fair share of the estate.”). Accord Leeper v. Pennsylvania Higher Educ. Assistance Agency, 49 F.3d 98 (3d Cir. 1995); In re Hamilton, 179 B.R. 749 (Bankr. S.D. Ga. 1995); Ridder v. Great Lakes Higher Educ. Corp. (In re Ridder), 171 B.R. 345 (Bankr. W.D. Wis. 1994).

 

11  In re Boggan, 125 B.R. 533 (Bankr. N.D. Ill. 1991). Accord In re Gregg, 179 B.R. 828, 830 (Bankr. E.D. Tex. 1995) (Debtor can separately classify three student loans for payment in full where other unsecured claim holders will be paid only .74%. “All of the student loans in this case are nondischargeable under 11 U.S.C. § 523. Therefore, a separate classification for these claims does not unfairly discriminate against the other unsecured creditors.”). See also In re Dillon-Bader, 131 B.R. 463 (Bankr. D. Kan. 1991) (In context of good-faith objection to confirmation, it is not improper for a Chapter 13 debtor to separately classify HEAL loans for 100% payment while paying other unsecured claim holders 10% because HEAL loans must be paid in full pursuant to 42 U.S.C. § 294f(g).).

 

12  See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination.

 

13  In re Foreman, 136 B.R. 532 (Bankr. S.D. Iowa 1992).

 

14  See §§ 170.1 [ Methods of Paying Unsecured Claims ] § 101.3  Methods of Paying Unsecured Claims and 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA.

 

15  In re Tucker, 159 B.R. 325, 328–29 (Bankr. D. Mont. 1993) (“Debtors in Chapter 13 have the unwaivable right to convert to Chapter 7 at any time. . . . If this case is converted to a Chapter 7 case, the unsecured creditors will receive nothing and have their claims discharged. If the Plan is confirmed they will receive 29% of their claims. The fairer treatment for the creditors is clearly the 29% dividend in Chapter 13, which Congress encourages Debtors to use in lieu of Chapter 7. . . . [T]he discrimination has a reasonable basis, i.e., it provides for the payment in full of nondischargeable student loans. . . . [T]he Debtors cannot carry out a Plan without the discrimination. The Debtors already have extended the Plan period to four years, longer than the three year period of 11 U.S.C. § 1322(c). If the discrimination is not allowed the Plan payments would be completed without the student loans paid in full, thereby leaving the Debtors saddled with debt after four years under a Plan and defeating their ‘fresh start.’ . . . [T]he discrimination is proposed in good faith. . . . [T]he degree of discrimination is directly related to the basis or rationale for the discrimination. They commit their disposable income for four years to the Plan, thereby providing a 29% dividend for creditors who would otherwise be left out in the cold in Chapter 7. The Plan pays in full a nondischargeable student loan and provides the Debtors with a ‘fresh start’ at the end of 48 months free from all debts.”).

 

16  In re Fears, 247 B.R. 219, 223 (Bankr. W.D. Ky. 2000), rev’d, 258 B.R. 371 (W.D. Ky. 2001).

 

17  See §§ 155.2 [ Long-Term Debts ] § 88.9  Long-Term Debts and 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4  Curing Default and Maintaining Payments on Unsecured Debt.

 

18  See In re Williams, 253 B.R. 220, 233 (Bankr. W.D. Tenn. 2000) (“This judge will permit arrearages on student loans to be paid in full, even though other unsecured claims will not be paid in full, if the student loan is treated as a long term debt pursuant to section 1322(b)(5)”); In re Chandler, 210 B.R. 898, 902–04 (Bankr. D.N.H. 1997) (Not unfair discrimination to separately classify long term student loan for direct payments under § 1322(b)(5) notwithstanding that other unsecured claim holders will receive only 9.5% through the Chapter 13 trustee. “[A]s a matter of law, . . . to the extent that the debtors’ proposed separate classification of their student loan debt . . . is put forward on the basis that the student loan debt is nondischargeable, that basis for differing treatment constitutes unfair discrimination.” The unfair-discrimination test in § 1322(b)(2) “is to protect creditors, and the only discrimination that can be condoned under this statutory section is discrimination that substantially benefits creditors even though some incidental benefit may accrue to the debtor.” The unfair-discrimination standard in § 1322(b)(1) applies to a debtor’s proposal to treat a long-term unsecured student loan under § 1322(b)(5) because Congress took no exception in § 1322(b)(5) for § 1322(b)(1). “Reviewing section 1322(b)(1), the Court finds that it does not prevent discrimination. Rather, section 1322(b)(1) prevents ‘unfair’ discrimination. The Court holds that placing unsecured creditors, like those holding student loans, into a separate class and permitting debtors to maintain their payments to them at the full contract rate, as expressly permitted by section 1322(b)(5), is not ‘unfair’ discrimination. This must be the result intended by Congress; otherwise, how could a debtor’s plan provide for the ‘maintenance of payments’ on ‘unsecured’ claims under section 1322(b)(5) if it were considered ‘unfair discrimination’ under section 1322(b)(1). . . . [I]n reality only in cases involving student loans and marital debt will section 1322(b)(5) be used, because a Chapter 13 debtor has no reason to ‘cure and maintain’ dischargeable debt. . . . Debtors may not accelerate payments or make any payment other than those necessary to cure defaults and keep current on the loan in accordance with the statute.”); In re Cox, 186 B.R. 744, 746–47 (Bankr. N.D. Fla. 1995) (Plan can separately classify a student loan for payment directly by the debtor consistent with § 1322(b)(5) notwithstanding that the effect is to pay 42.3% of the student loan over the life of a plan that only pays 18% to other unsecured claim holders. That student loans are nondischargeable “does not automatically allow them to be treated differently within a chapter 13 plan.” The proposed treatment “may be tolerated in this situation because section 1322(b)(5) proves that ‘a form of discrimination is sometimes possible in bankruptcy, even if creditors can correctly view it as most unfair.’ . . . [Section] 1322(b)(5) prevents a finding of unfair discrimination in this case as a matter of law.” The plan treats the student loans “differently” than other unsecured debt. “However, these loans are to be paid according to their individual contractual terms during the life of the plan. The student loan creditors are to receive no more than they would have received outside of bankruptcy, and will not be paid ‘in full’ during the life of the plan . . . . This is not a case involving the unnecessary acceleration of student loan debt. . . . Instead, these debtors are merely making the minimum payments due under the terms of the loans. . . . [T]he debtors’ treatment of their student loan debt in this manner, and its payment outside the plan, will reduce the distribution to the other unsecured creditors by 42%. While this may be discriminatory, it is not ‘unfair’ as defined by 1322(b)(1), because such treatment is specifically sanctioned by the bankruptcy code.”); In re Benner, 156 B.R. 631, 633–35 (Bankr. D. Minn. 1993) (“By its express terms, section 1322(b)(5) also applies to both secured and unsecured debt. Long-term student loan obligations with payment terms that extend beyond completion of the plan fall squarely within the ambit of section 1322(b)(5). Since student loan debt and marital dissolution obligations are the only significant type of long-term debt carried by chapter 13 debtors, section 1322(b)(5) would be rendered largely ineffective with respect to unsecured debt if student loans could not be treated thereunder solely because the creditor would receive better treatment than other nonpriority unsecured creditors. I conclude therefore, that student loan debt which is properly treated outside the plan in accordance with section 1322(b)(5), does not result in unfair discrimination in violation of section 1322(b)(1). This result is in accord with the Eighth Circuit Court of Appeals’ test for unfairly discriminatory class designations set forth in [Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991),] . . . . Although the four-part test enunciated in Leser has been criticized, it is the law in this Circuit . . . . Excluding HEAF [Higher Education Assistance Foundation] from the nonpriority unsecured class and paying it outside the plan according to the terms of the promissory note meets the four-part Leser test in this case. First, the basis for the discriminatory treatment is that the HEAF claim is nondischargeable, and the debtor wishes to emerge from chapter 13 without being burdened by such debt. If the HEAF claim were included in the nonpriority unsecured class, the debtors would only satisfy 19% of the nondischargeable HEAF claim during the plan period and would emerge from chapter 13 still owing 81% . . . . The debtors’ fresh start will therefore be impaired if the HEAF claim is classified with the other nonpriority unsecured creditors. A debtor’s interest in receiving a fresh start and emerging from chapter 13 unencumbered by substantial nondischargeable debt can be a reasonable basis for discriminatory classification. . . . Second, these debtors could not obtain a fresh start through a chapter 13 plan absent treatment of the HEAF debt outside the plan. . . . While such a plan is possible, it makes no sense to hold that the four-part test of Leser is not met solely because the debtors can carry out a plan that would essentially deny them their fresh start. Third, the discrimination is proposed in good faith. By making student loan obligations nondischargeable, Congress has made it clear that such debt should be paid in full. The debtors are simply seeking to use their best efforts to repay HEAF and their other creditors and still emerge from Chapter 13 without substantial debt . . . . Fourth, the degree of discrimination is directly related to the debtor’s legitimate interest in a fresh start. . . . [A]n extreme impairment of the debtors’ fresh start justifies depriving the nonpriority unsecured creditors of the additional 14% distribution they would receive without the discriminatory classification.”); In re Dodds, 140 B.R. 542 (Bankr. D. Mont. 1992) (Rejecting the “bright line” test adopted in In re Taylor, 137 B.R. 60 (Bankr. W.D. Okla. 1992), confirms payment in full of nondischargeable student loan “outside” the plan with contract interest according to contract terms over a period of 54 months while other unsecured claims are to receive approximately 79% over 36 months through the plan. Treating student loans as long-term debts satisfies the confirmation requirement that a separate classification cannot unfairly discriminate.).

 

19  See, e.g., McDonald v. Sperna (In re Sperna), 173 B.R. 654, 659–60 (B.A.P. 9th Cir. 1994) (“Section 1322(b)(5) . . . is one of the mechanisms which the Debtors may be able to utilize to obtain their fresh start.”); In re Sullivan, 195 B.R. 649, 658 (Bankr. W.D. Tex. 1996) (“As a matter of law, the maintenance of long-term debt obligations according to their terms does not result in ‘unfair discrimination,’ in no small part because such obligations are not being satisfied out of the plan payment (with the possible exception of the ‘cure’ of arrearages) but out of the debtor’s income. . . . The payment of long-term obligations on a current basis also does not run afoul of section 1325(b), with its requirement that all of a debtor’s net disposable income be devoted to ‘plan payments.’ Maintaining the current payments on a long-term obligation is one of the provisions permitted to be contained in the debtor’s plan. . . . Thus, if a student loan also qualifies as a long-term obligation under section 1322(b)(5), a debtor’s plan may provide for the cure of any arrearages and the maintenance of payments without running afoul of the ‘unfair discrimination’ limitations of section 1322(b)(1).” In a note, the court offers “one caveat: the payout of the arrearages over time, in competition with other creditors, must be done in a fashion which does not ‘unfairly discriminate.’”); In re Saulter, 133 B.R. 148, 150 (Bankr. W.D. Mo. 1991) (Unfair discrimination to separately classify nondischargeable student loan creditors for 100% payment and 10% payment to other unsecured creditors. “There is nothing to stop debtor from carrying out a plan without such unfair discrimination. Debtor need only formulate a plan which treats her student loans as long term indebtedness under § 1322(b)(5). Even though such treatment may require treating student loans differently than other unsecured debt, it cannot be said that it would unfairly discriminate because the treatment would be in full accordance with Code provisions . . . Any other treatment that discriminates in favor of student loan creditors at the expense of the other unsecured creditors where the final scheduled student loan payment falls due after the date of the plan is unfairly discriminatory.”).

 

20  See, e.g., Labib-Kiyarash v. McDonald (In re Labib-Kiyarash), 271 B.R. 189, 195–96 (B.A.P. 9th Cir. 2001) (Direct payment of long-term student loans at contract rates is subject to the unfair-discrimination test. “[W]e adopt the majority view and hold that a debtor may use § 1322(b)(5) to maintain long-term student loan payments at the contract rate while curing any arrearage through the plan, provided that the debtor’s plan satisfies the [AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982),] test for unfair discrimination under § 1322(b)(1). In applying the Wolff test, a debtor has the burden of proving that separate classification does not unfairly discriminate against the other unsecured creditors. . . . [I]n accordance with [McDonald v. Sperna (In re Sperna), 173 B.R. 654 (B.A.P. 9th Cir. 1994),] the nondischargeable nature of the Loans is alone an insufficient basis for separately classifying the Loans.”); In re Edwards, 263 B.R. 690, 691 (Bankr. D.R.I. 2001) (Plan paying unsecured creditors nothing but continuing $140-per- month payments directly to a student loan creditor fails the unfair-discrimination test in § 1322(b)(1). “If the Debtor adds the student loan payment to the Plan, unsecured creditors will be paid 25% of their claims. . . . [E]ven though a plan calls for the continuation of payments on long term unsecured debts in accordance with Section 1322(b)(5), it must also provide that such treatment does not unfairly discriminate against other unsecured creditors under Section 1322(b)(1).”); In re Colley, 260 B.R. 532, 538–41 (Bankr. M.D. Fla. 2000) (Plan unfairly discriminates by continuing contractual student loan payments resulting in a 36% dividend while paying other unsecured creditors 2%. “Student loan debts that qualify for § 1322(b)(5) treatment must nonetheless pass § 1322(b)(1) ‘unfair discrimination’ muster. The Court will not allow student loan debtors to make an end run around § 1322(b)(1) by using § 1322(b)(5) as a pretense for classification where nondischargeability must be the true motivation for discrimination. . . . [N]ondischargeability is not a ‘fair’ basis for discrimination. . . . Debtor did not articulate any motivation for ‘cure and maintain’ treatment of her student loans aside from their nondischargeability. . . . The Court chooses to abandon the hopelessly ad hoc application of the [Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991),] test and elects to adopt a strict bright line rule on unfair discrimination in student loan cases. . . . [I]f a Chapter 13 Plan provides for full contractual payments that amount to a certain percentage of the student loan creditor’s claim while providing for a lower percentage of other unsecured creditor’s claims to be paid off through pro rata distribution, then the plan discriminates unfairly under § 1322(b)(1) and may not be confirmed.”); In re Thibodeau, 248 B.R. 699, 704–07 & n.9 (Bankr. D. Mass. 2000) (Separate classification of arrearage on a student loan for payment in full as part of long term treatment under § 1322(b)(5) unfairly discriminates when other unsecured claim holders will receive only 27%, the debtor has some excess income indicative of bad faith and the debtor could propose a 29% level payment plan. “This Court agrees with the courts in [In re Chandler, 210 B.R. 898 (Bankr. D.N.H. 1997)], [In re Sullivan, 195 B.R. 649 (Bankr. W.D. Tex. 1996)] and [In re Coonce, 213 B.R. 344 (Bankr. S.D. Ill. 1997)]. Subsections 1322(b)(1) and (b)(5) should both be given effect. . . . [A] Plan that proposes to discriminate against a class of creditors is not filed in good faith where the Debtor does not apply the entire amount of her excess income towards paying her creditors. Although neither the Chapter 13 Trustee, nor other creditors have objected to the Debtor’s projected monthly payment amount, the Court is ‘under an independent duty to verify that Chapter 13 plan does in fact comply with the law irrespective of lack of objection by creditors or the Chapter 13 trustee.’ . . . Because the Debtor has an additional $72.22 in excess income per month that is not applied to Plan payments, the Court finds that the Debtor can increase the dividend . . . to 29.1%. The Court cannot find that the Debtor’s discrimination has been proposed in good faith where a substantial sum of money is left unaccounted for. . . . [O]ther options exist for the Debtor to propose a less discriminatory plan. . . . Her argument for separate classification is predicated upon treatment of the claim as long term indebtedness under § 1322(b)(5). Nevertheless, it is obviously in the Debtor’s interest to reduce the amount of nondischargeable debt remaining after the completion of her Chapter 13 Plan. . . . [W]here a mixed motive exists for the separate classification, discriminatory treatment will not be permitted under the guise of § 1322(b)(5). . . . While maintaining payments of $585 per month, the Debtor is also making payments of $112.47 per month toward the arrearage, for a total monthly payment of $696.47 on a debt of $61,064.31. In contrast, she is paying approximately $1,100 per month on [general unsecured] claims totaling in excess of $180,000. Thus, the HEAL creditor is being paid 2/3 of what other unsecured creditors are being paid, on a debt which is approximately 1/3 of her total unsecured debt. . . . If the Debtor did not separately classify the HEAL loan arrearage, however, and treated all the unsecured creditors equally, making payments of $1,374 monthly, all unsecured creditors, including the HEAL creditor, would receive a dividend of 29.3%. . . . Alternatively, the Debtor could propose a plan which provides that for the first 36 months all payments would be devoted to all unsecured claims, and that for the remaining 24 months payments would be devoted solely to the student loans.” In a footnote, “[w]hile the Court cannot force the Debtor to extend her Plan beyond the 36 month minimum, the Court must balance the interests of the Debtor against those of unsecured creditors in determining whether the classification is fair. . . . Under a 60 month Plan, devoting all of her disposable income, the Debtor could pay all general unsecured creditors approximately $86,760, or approximately 71% of their claims.”); In re Coonce, 213 B.R. 344, 346–49 (Bankr. S.D. Ill. 1997) (Separate classification of student loan for long-term treatment under § 1322(b)(5) fails unfair-discrimination test in § 1322(b)(1). Long-term treatment would pay student loan creditor 33.1%, and other unsecured creditors would receive 10.56%. Absent separate classification, all unsecured creditors would receive 16.88%. “[D]iscrimination in favor of educational loans based on their nondischargeable nature is unfair and, therefore, violates § 1322(b)(1). . . . [F]rom the perspective of unsecured creditors holding dischargeable claims, it would be patently unfair for creditors holding nondischargeable claims—who may thus pursue post-bankruptcy collection efforts against the debtor—to be preferred not only after the bankruptcy case is completed but also during the time payments are being made to creditors. . . . [Section] 1322(b)(1) does apply to obligations designated as long-term debts under § 1322(b)(5). However, it cannot conclude that every such classification satisfies the § 1322(b)(1) test of ‘fair discrimination’ as a matter of law. . . . A careful examination of § 1322(b) reveals that its provisions are cumulative unless otherwise provided. An interpretation allowing preferential treatment of student loan debts so long as they are classified as long-term indebtedness under § 1322(b)(5) would render subsection (b)(1) superfluous. Taken to its logical conclusion, such an interpretation would require that any designation or plan provision made pursuant to a subsection of § 1322(b) would be per se exempt from the ‘fair discrimination’ requirement of § 1322(b)(1). . . . [A]llowing the debtors to discriminate in favor of student loan creditors would, in effect, create an artificial priority scheme not provided for in § 507(a). . . . Because of the nature of student loan debts, a debtor will often have a ‘mixed’ motive for classifying these obligations as long-term indebtedness, with the real incentive being the reduction of his nondischargeable debt burden following bankruptcy. This Court will not permit such an ‘end run’ around § 1322(b)(1) and specifically finds that § 1322(b)(1) prohibits unfair discrimination even when it appears in the guise of treatment of long-term debt under § 1322(b)(5). . . . [I]t may be possible for the debtors to formulate a nondiscriminatory plan. . . . Discrimination of this magnitude is unnecessary . . . . [T]he debtors could extend the duration of their plan . . . . [A] ‘non-bankruptcy’ alternative would be for the debtors to seek a deferral of their educational loans.”).

 

21  See §§ 346.1 [ Student Loans ] § 158.2  Student Loans and 351.1 [ Long-Term Debts ] § 158.7  Long-Term Debts.

 

22  See below in this section.

 

23  See discussion of projected disposable income test beginning at § 91.1  In General.

 

24  181 B.R. 598 (Bankr. N.D. Ala. 1995).

 

25  181 B.R. at 599. This outcome is consistent with Professor Boshkoff’s proposed rules for classification of unsecured claims in Chapter 13 cases, discussed in § 159.1 [ A Proposal: Simpler Rules for Classification of Unsecured Claims ] § 89.10  A Proposal: Simpler Rules for Classification of Unsecured Claims. See § 201.1 [ Cause for Extension beyond Three Years ] § 112.4  Cause for Extension beyond Three Years for discussion of extension of a Chapter 13 plan beyond 36 months for “cause” to pay a nondischargeable student loan.

 

26  137 B.R. 60 (Bankr. W.D. Okla. 1992).

 

27  137 B.R. at 65. See also In re Carlson, 276 B.R. 653 (Bankr. D. Mont. 2002) (Applying test from Amfac Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), debtor failed to articulate any basis—“rational or otherwise”—for five-year plan that pays all unsecured creditors pro rata for three years and then pays only nondischargeable student loans for the next two years.); In re Sullivan, 195 B.R. 649, 657 (Bankr. W.D. Tex. 1996) (Rejecting In re Strickland, 181 B.R. 598 (Bankr. N.D. Ala. 1995), debtor cannot separately classify student loan for 100% payment and 3% to other unsecured claims, but debtor can use § 1322(b)(5) to treat the student loan as a long-term debt. Strickland “seem[s] to miss the point of sections 1322(d) and 1325(b). The purpose behind these sections is not to prevent a debtor from extending his plan to provide a greater payout to creditors. The purpose is to prevent debtors from stretching the same payout over a longer period unless the court finds ‘cause’ to allow the debtor two extra years. . . . Strickland . . . [presumes] that the question of unfair discrimination applies only to the first thirty-six months of the plan. The statute itself, however, draws no such distinction.”).

 

28  See §§ 163.1 [ In General ] § 91.1  In General and 166.1 [ Counting the Three-Year Period ] § 91.5  Counting the Three-Year Period.

 

29  See §§ 199.1 [ General Rule: Three Years, More or Less ] § 112.1  General Rule: Three Years, More or Less and 201.1 [ Cause for Extension beyond Three Years ] § 112.4  Cause for Extension beyond Three Years.

 

30  See 11 U.S.C. § 1325(a)(4), discussed beginning at § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

31  However, it is often true that Chapter 13 debtors propose longer plans in order to deal with potential objections to confirmation and to accomplish other objectives. See § 201.1 [ Cause for Extension beyond Three Years ] § 112.4  Cause for Extension beyond Three Years.

 

32  For example, as discussed in § 154.1 [ Restitution, Fines and Other Criminal Problems ] § 88.7  Restitution, Fines and Other Criminal Problems with respect to restitution, Congress could have amended § 1322(a) or (b) to indicate how student loans must be paid through a Chapter 13 plan. Congress chose instead to make student loans nondischargeable, leaving the propriety of a debtor’s proposal for payment through the plan to other tests. The unfair- discrimination test is anything but a “brightline” test. See also § 159.1 [ A Proposal: Simpler Rules for Classification of Unsecured Claims ] § 89.10  A Proposal: Simpler Rules for Classification of Unsecured Claims.

 

33  Groves v. LaBarge (In re Groves), 39 F.3d 212, 215–16 (8th Cir. 1994) (Separate classification of student loan claims for 100% payment and 10 to 40% repayment of other unsecured claim holders is not permitted by the Bankruptcy Code absent a showing that the discriminatory treatment is necessary for the debtor to complete the Chapter 13 plan. “With respect to student loan obligations . . . public policy does not dictate full payment of such debts during the life of the plan. Thus, there is nothing to stop a debtor from carrying out a Chapter 13 plan without separate classification of these claims. The debtor need only formulate a plan which pays student loan debtors [sic] pro rata with other unsecured creditors during the life of the plan as a continuing obligation thereafter. Alternatively, the debtor may treat the student loan obligation as a long term indebtedness under § 1322(b)(5), curing arrearages within a reasonable time and thereafter maintaining regular payments. While such plan treatment may result in the debtor emerging from his Chapter 13 plan with a continuing obligation which may impede the debtor’s fresh financial start, such an imposition may be the result envisioned by Congress in amending § 1328(a)(2) to make student loans nondischargeable in a Chapter 13 case. . . . Absent a showing that discriminatory treatment is necessary for the debtor to complete his Chapter 13 plan, separate classification of student loan and general unsecured obligations cannot be permitted under the Bankruptcy Code. . . . [T]he nondischargeability of student loan claims, by itself, does not justify substantial discrimination against other, dischargeable unsecured claims in a Chapter 13 plan.”); Bentley v. Boyajian (In re Bentley), 266 B.R. 229, 239–42 (B.A.P. 1st Cir. 2001) (Unfair discrimination to separately classify student loan for payment in full and 3.6% to other unsecured claims. Rejecting the four-part test from Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991), and rejecting the “legitimate interest of the debtor” test in In re Brown, 152 B.R. 232 (Bankr. N.D. Ill.), rev’d, 162 B.R. 506 (N.D. Ill. 1993), “we prefer the approach adopted in [In re Colfer, 159 B.R. 602 (Bankr. D. Me. 1993)], . . . which is to look to Chapter 13 itself for what is normative, the baseline from which departures can be discerned, measured, and evaluated for fairness. . . . [A]bsent an express grant of priority (as under § 507(a)) or cause for subordination under § 510(c), unsecured creditors should share equally in any dividend. . . . [S]tudent loan obligations are not debts to which the Code grants priority. . . . They are indeed excepted from discharge, but . . . nondischargeability is not, and does not entail, priority as to any distribution in or through bankruptcy . . . . [S]haring on a pro rata basis is fair as between those creditors whose debts are dischargeable and those whose are not, because . . . their claims are of equal priority. . . . [E]ven with pro rata sharing, the nondischargeable claims still are treated better than the dischargeables because . . . they retain their right to collect their debts after bankruptcy. . . . [I]nsistence on pro rata sharing does not cure this disparity but at least prevents the disparity from being further exacerbated. . . . Chapter 13 does not contemplate that a debtor will necessarily emerge from Chapter 13 entirely free of student loan obligations.”), aff’g In re Bentley, 250 B.R. 475, 478 (Bankr. D.R.I. 2000) (Unfair discrimination to pay 100% of nondischargeable student loan and 5% to a class of unsecured creditors. “Public policy normally favors discriminating in favor of child support claims because a child’s needs generally exceed those of the unsecured creditor. . . . The Debtors point to no authority, nor are we able to equate the rights of a child support creditor with those of a student loan creditor under this section of the Code. . . . [T]o separately classify and treat unsecured student loans differently from other unsecured creditors for the reason that the student loan debt is nondischargeable, constitutes unfair discrimination and violates the provisions and the spirit of 11 U.S.C. § 1322(b)(1).”); McDonald v. Sperna (In re Sperna), 173 B.R. 654, 658–60 (B.A.P. 9th Cir. 1994) (Applying four-part test from AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), “the nondischargeable nature of a student loan debt is not, by itself, a reasonable basis for discrimination. . . . [T]here is nothing in the Code or case law that defines ‘fresh start’ as the emergence from bankruptcy completely free of all debt. . . . [The 1990 amendments to § 1328] show[] Congress’ desire that student loans be repaid. However, Congress had the opportunity to grant student loans priority status . . . as it did with co-signed consumer debts. But it did [not]. . . . There is nothing to indicate that student loans, simply because they are nondischargeable, should effectively be given priority over all other unsecured claims. . . . Section 1322(b)(5) . . . is one of the mechanisms which the Debtors may be able to utilize to obtain their fresh start. . . . We hold that the nature of student loans as nondischargeable is not, by itself, a reasonable basis for giving them preferential treatment. Instead, the Debtor must show some other factors which demonstrate that discrimination is necessary.”); Eck v. Willis (In re Willis), 197 B.R. 912, 915 (N.D. Okla. 1996) (Reverses confirmation of plan that separately classified student loans for 100% payment and 10% to other unsecureds. Cites McCullough v. Brown, 162 B.R. 506 (N.D. Ill. 1993), with approval. “The sole ground asserted by the debtor for the separate treatment of student loans is that the loans are nondischargeable. This reason focuses solely upon the interests of the debtor, and, simply put, does not justify the discriminatory treatment. . . . Absent some other justification for the discriminatory treatment, the Court cannot affirm the approval of a Chapter 13 Plan permitting the disparate treatment of student loans and other unsecured debts.”); McCullough v. Brown (In re Brown), 162 B.R. 506, 509, 510, 511–18 (N.D. Ill. 1993) (Rejecting four-part test, it is unfair discrimination to separately classify nondischargeable student loans for payment in full with 10% payment to other unsecured creditors. With respect to the first two steps of the four-part test, “the ‘reasonable basis’ formulation is no more useful than the undefined statutory concept of ‘discriminate unfairly.’” With respect to the third factor—necessity for the plan’s viability—“debtors could almost always design plans that do not discriminate. One way to do so would be simply to treat student loans as long term debt under Section 1322(b)(5). . . . [I]t is not clear why the test should be phrased in such a way as to make necessity a required element of fairness to begin with. To be sure, necessity may have a place in the analysis. But the fact that a debtor has the ability to formulate an alternative nondiscriminatory plan should not alone be sufficient to render it unfair.” Observing that the four-part test would require a ruling of “unfair discrimination at the outset,” the court then criticizes the new approach of Judge Wedoff and offers an alternative analysis: “Judge Wedoff advocates a solely debtor-oriented ‘legitimate interest’ test. . . . [Judge Wedoff’s] analysis invokes the rubric and phraseology of equal protection jurisprudence. . . . If a state government were to design a bankruptcy plan and propose some type of discriminatory treatment, perhaps such a rational interest test would be appropriate. But it is readily apparent that individual Chapter 13 debtors cannot properly be viewed as ranking on a parity with a sovereign charged with maximizing its citizens’ welfare. . . . Judge Wedoff’s equal-protection-based test . . . also goes well beyond the Equal Protection Clause’s approach by regarding the situation solely from the perspective of the actor and not at all from the perspective of those being acted upon. . . . [W]hile the interests of the debtor may not be wholly ignored, this Court concludes that Section 1322(b)(1) is ultimately intended as a creditor protection device. . . . [T]he normal meaning of ‘unfairly against any class’ measures the unfairness of the difference in treatment . . . in terms of unfairness to the victim . . . rather than unfairness to the person who elects to impose the discriminatory treatment. . . . [I]f Congress had intended debtors to be able to prefer the holders of their student loan obligations at the expense of other creditors, it could have done so explicitly by granting a statutory priority. . . . Congress has expressly decided that a debtor who has not paid off 100% of [student] loans will not emerge from Chapter 13 washed clean of the indebtedness. It is thus ironic (to say the least) to point to the generalized bankruptcy goal of a fresh start as the claimed ‘justification’ for a plan that is skewed in favor of paying debts that will have to be paid in all events. . . . By creating a widely disparate treatment for other unsecured claims vis-a-vis their student loans, they are indeed choosing to shift part of the burden for payment of their student loans: not to taxpayers generally or to the lending institutions or other prospective loan recipients, but to their other unsecured creditors. . . . There may well be factors that would not satisfy the Section 523(a)(8)(B) standard for the full dischargeability of student loan debt, but could yet justify some discriminatorily favorable treatment of such debts. But no such factor has been identified by any Debtor in this case. . . . Nor does this Court find itself persuaded by any parallel sought to be drawn between the current situation and the cases that have approved preferential treatment for a Chapter 13 debtor’s obligations to provide child support. . . . [W]hat remains clear is that no Chapter 13 plan can be approved that treats unpaid student loans more favorably than other unsecured debts solely because they are student loans. If a plan affording such preferential treatment is to survive scrutiny under the statutory ‘discriminate unfairly’ test, the debtor must place something material onto the scales to show a correlative benefit to the other unsecured creditors.” The court quotes extensively with approval from Judge Ginsberg’s opinion in In re Chapman, 146 B.R. 411 (Bankr. N.D. Ill. 1992).); In re Mason, 300 B.R. 379 (Bankr. D. Kan. 2003) (Unfair discrimination to separately classify student loan for 17% payment when 57-month plan will pay other unsecureds nothing and pro rata plan would pay all unsecured creditors 7%.); In re Simmons, 288 B.R. 737, 748–53 (Bankr. N.D. Tex. 2003) (Unfair discrimination to separately classify student loans for greater payment when general unsecureds will receive less than they would be paid if all unsecureds were paid pro rata. “[Chacon v. Bracher (In re Chacon), 202 F.3d 725 (5th Cir. 1999),] and [Ramirez v. Bracher (In re Ramirez), 204 F.3d 595 (5th Cir. 2000),] appear to establish a two-prong test for fair discrimination in treatment between classes. First, the discrimination must serve a rational, legitimate purpose of the debtor. Second, the discrimination may not over-favor the advantaged class. . . . [F]or discrimination to be fair, the amount to be received by the class discriminated against must not be less than the class would have been entitled to receive had there been no discrimination among classes. . . . A debtor who separately classifies and discriminates in favor of a student loan creditor meets the rational purpose element. . . . [A] plan in chapter 13 does not discriminate unfairly so long as . . . the class discriminated against receives under the plan a return at least equal to what the class would have received if (a) there were no discrimination, and (b) 36 months of the debtor’s disposable income were applied to make payments under the plan.”); In re Beauchamp, 283 B.R. 287, 288–89 (Bankr. D. Minn. 2002) (Separate classification of co-signed student loans for payment in full is unfairly discriminatory. “In general, unsecured student loans cannot be treated more favorably than other unsecured debt by Chapter 13 plans in this District. . . . The fact that the loans are cosigned by their children does not provide a legitimate basis for the discrimination. . . . There is no legitimate purpose in allowing the Debtors to pay the obligations of their children, who received the benefits of the loans, at the expense of the Debtors’ other unsecured creditors. Such treatment is unfairly discriminatory.”); In re Edwards, 263 B.R. 690 (Bankr. D.R.I. 2001) (Plan paying other unsecured creditors nothing but continuing $140-per-month payments directly to a student loan creditor fails the unfair-discrimination test in § 1322(b)(1).); In re Colley, 260 B.R. 532 (Bankr. M.D. Fla. 2000) (Plan unfairly discriminates by continuing contractual student loan payments resulting in a 36% dividend while paying other unsecured creditors 2%.); In re Thibodeau, 248 B.R. 699 (Bankr. D. Mass. 2000) (Separate classification of arrearage on a student loan for payment in full as part of long-term treatment under § 1322(b)(5) unfairly discriminates when other unsecured claim holders will receive only 27%, the debtor has some excess income indicative of bad faith and the debtor could propose a 29%-level payment plan.); In re Mammel, 221 B.R. 238 (Bankr. N.D. Iowa 1998) (Debtor’s proposal to have student loans declared dischargeable upon confirmation of a plan is rejected in part on unfair discrimination grounds.); In re Turpen, 218 B.R. 908 (Bankr. N.D. Iowa 1998) (Proposal to pay student loans in full even if liquidation of nonexempt property is not sufficient to pay other unsecured claims is an unfair discrimination.); In re Coonce, 213 B.R. 344, 346–49 (Bankr. S.D. Ill. 1997) (Separate classification of student loan for long-term treatment under § 1322(b)(5) fails unfair-discrimination test in § 1322(b)(1). Long term treatment would pay student loan creditor 33.1% and other unsecured creditors would receive 10.56%. Absent separate classification, all unsecured creditors would receive 16.88%. “[D]iscrimination in favor of educational loans based on their nondischargeable nature is unfair and, therefore, violates § 1322(b)(1). . . . [F]rom the perspective of unsecured creditors holding dischargeable claims, it would be patently unfair for creditors holding nondischargeable claims—who may thus pursue post-bankruptcy collection efforts against the debtor—to be preferred not only after the bankruptcy case is completed but also during the time payments are being made to creditors. . . . [Section] 1322(b)(1) does apply to obligations designated as long-term debts under § 1322(b)(5). However, it cannot conclude that every such classification satisfies the § 1322(b0(1) test of ‘fair discrimination’ as a matter of law. . . . A careful examination of § 1322(b) reveals that its provisions are cumulative unless otherwise provided. An interpretation allowing preferential treatment of student loan debts so long as they are classified as long-term indebtedness under § 1322(b)(5) would render subsection (b)(1) superfluous. Taken to its logical conclusion, such an interpretation would require that any designation or plan provision made pursuant to a subsection of § 1322(b) would be per se exempt from the ‘fair discrimination’ requirement of § 1322(b)(1). . . . [A]llowing the debtors to discriminate in favor of student loan creditors would, in effect, create an artificial priority scheme not provided for in § 507(a). . . . Because of the nature of student loan debts, a debtor will often have a ‘mixed’ motive for classifying these obligations as long-term indebtedness, with the real incentive being the reduction of his nondischargeable debt burden following bankruptcy. This Court will not permit such an ‘end run’ around § 1322(b)(1) and specifically finds that § 1322(b)(1) prohibits unfair discrimination even when it appears in the guise of treatment of long-term debt under § 1322(b)(5). . . . [I]t may be possible for the debtors to formulate a nondiscriminatory plan. . . . Discrimination of this magnitude is unnecessary . . . . [T]he debtors could extend the duration of their plan . . . . [A] ‘non-bankruptcy’ alternative would be for the debtors to seek a deferral of their educational loans.”); In re Gonzalez, 206 B.R. 239 (Bankr. S.D. Fla. 1997) (Unfair discrimination to pay 100% of student loan and 6% of other unsecured claim holders.); In re Kolbe, 199 B.R. 569, 575–76 (Bankr. D. Md. 1996) (Reviewing four different tests for separate classification of student loans, adopts In re Husted, 142 B.R. 72 (Bankr. W.D.N.Y. 1992), and denies separate classification of student loans for 100% payment and 10% payment to other unsecureds. “‘[T]he nondischargeable nature of a student loan debt is not, by itself, a reasonable basis for discrimination.’ . . . [D]ebtors have failed to show satisfactorily that they could not carry out their plans without treating the disadvantaged claims less favorably. . . . [W]hat is a meaningful payment to the unfavored class must be determined on the facts of each case. . . . [T]en percent over time appears sufficiently small to prompt close scrutiny. . . . Without such discriminatory treatment, under Mr. Kolbe’s plan proposal all unsecured creditors would receive 83%, and under Ms. Whitley’s proposal they would receive approximately 57%. Both proposed plans would produce a difference in repayment that is substantially more than the 20% threshold adopted by the court in In re Sullivan, [195 B.R. 649 (Bankr. W.D. Tex. 1996)].”); In re Sullivan, 195 B.R. 649, 654 (Bankr. W.D. Tex. 1996) (Rejecting In re Strickland, 181 B.R. 598 (Bankr. N.D. Ala. 1995), debtor cannot separately classify student loan for 100% payment and 3% to other unsecured claims, but debtor can use § 1322(b)(5) to treat the student loan as a long-term debt. “Fresh start” is not a sufficient basis for separate classification of student loans because fresh start is “coterminous with the discharge. By making a given debt nondischargeable, Congress has elevated the need to repay such a debt over the debtor’s interest in a fresh start.” Congress did not define student loans as priority debts, thus there is no obvious policy in the Bankruptcy Code to prefer student loans over other unsecured claims. “So far as this court is concerned, if a given discrimination scheme results in a disparity of treatment such that unsecured creditors will receive not more than 20% less than they would have received in the absence of the proposed discrimination, then the Trustee need not object to the proposal or bring it to the court’s attention.”); In re Goewey, 185 B.R. 444, 447 (Bankr. N.D.N.Y. 1995) (It is unfair discrimination to separately classify student loan for 100% payment and 10% payment to general unsecureds. “[T]he mere nondischargeable nature of the student loan obligation is not sufficient justification in itself to warrant the unfair treatment of other unsecured creditors proposed here. . . . Although student loans are nondischargeable, they do not possess the same fundamental societal importance as nondischargeable child support or maintenance.”); In re Anderson, 173 B.R. 226, 230 (Bankr. D. Colo. 1993) (Applying four-part test, “absent proof of extraordinary or compelling circumstances,” it is unfair discrimination to separately classify nondischargeable student loans for more favorable treatment than other unsecured claims. “‘[A] successful plan and . . . fresh start,’ standing alone, fail[] to constitute a ‘reasonable basis’ for discriminating against other unsecured nonpriority creditors. . . . If the student loan creditor is not entitled to 100% repayment of the loan before the scheduled completion of the Chapter 13 plan, then a plan which pays 100% of that loan during the term of the plan would unacceptably accelerate payment of the student loan debt to the detriment of other creditors.”); In re Eiland, 170 B.R. 370, 378, 380 (Bankr. N.D. Ill. 1994) (100% plan that pays nondischargeable student loans as “priority” claims in advance of other unsecured claim holders cannot be confirmed because student loans are not priority claims under § 507. Retreating somewhat from In re Christophe, 151 B.R. 475 (Bankr. N.D. Ill. 1993), the new test for the fairness of discrimination is “[t]he reasoning of Judge Shadur, [in McCullough v. Brown, 162 B.R. 506 (N.D. Ill. 1993),] which looked to fairness from the creditor’s perspective. . . . This Court will not, however, necessarily find Judge Shadur’s ‘correlative benefit’ test of creditor fairness to be the only test of fairness from the creditor’s perspective. In each case, debtors have the burden to demonstrate fairness from the creditor’s perspective, and the Court is not so foresighted as to anticipate all circumstances that may demonstrate fairness.” Debtors may prove circumstances to justify the fairness of a classification that preferentially treats student loans; however, such loans “must ordinarily be treated the same as other unsecured debt. . . . [D]ebtors have a heavy burden to demonstrate fairness to creditors under § 1322(b)(1).”); In re Colfer, 159 B.R. 602, 605–11 (Bankr. D. Me. 1993) (It is unfair discrimination to separately classify nondischargeable educational loans for 100% dividend and substantially less to other general unsecured claims. “I accept the general proposition that Chapter 13 provides debtors flexibility to classify unsecured claims in order to enhance their ability to propose and complete a feasible plan. . . . No single test or formula provides a satisfactory structure for all contexts. The question . . . boils down to whether the plan reflects a reasonable balance in ‘the relative benefits allocated to the debtor and creditors from the proposed discrimination.’ . . . [T]he burden rests on the debtors to persuade the court, by a preponderance of the evidence, that the classification and treatment they propose does not discriminate unfairly. . . . The debtors rest on the assertion that the nondischargeability of educational loans, by itself, provides a sufficient basis to justify discrimination in their favor. To the contrary, more is required. If nondischargeability alone were sufficient reason to establish that discrimination on the order of that proposed by these debtors is ‘fair,’ the result would be at odds with significant aspects of the Code’s overall Chapter 13 framework. . . . [I]f Congress had intended to give educational loan obligations a distributional priority, it could have done so by including them in the list of statutory priorities. . . . [I]f it considered that their character alone justified preferential classification, Congress could have amended § 1322(b)(1) to provide expressly that such obligations, like cosigned consumer debt, may be separately classified. . . . In the absence of such legislative action, I cannot conclude that Congress intended that educational loans should be paid ahead of other nonpriority unsecured claims. . . . The courts should not approve as ‘fair’ discriminatory classification schemes ‘needed’ only for the purpose of mitigating the consequences of statutory discharge exceptions. . . . Although the support and alimony cases are analogous . . . they are not persuasive. . . . [N]ondischargeability does not by itself provide grounds sufficient to declare that proposed discrimination is fair under § 1322(b)(1). Instances may arise in which Chapter 13 is advantageous to the general unsecured creditors and in which the debtor’s circumstances militate in favor of disparate classification and treatment of like claims if a plan is to be effectuated. Such instances can only be evaluated on a case by case basis.”); In re Smallberger, 157 B.R. 472, 475–77 (Bankr. D. Or. 1993) (Court denies confirmation of a plan that would separately classify student loans for payment in full while paying nothing to other unsecured creditors. “[I]t is apparent that co-signed consumer obligations are not the only type of unsecured claims which may be separately designed. If co-signed consumer obligations were the only permitted classification, there would be no need for the first phrase . . . which begins ‘subject to’ and ends ‘any class so designated.’ . . . [I]t is apparent that the court should consider the proposed classification from the viewpoint of the creditors who are discriminated against. . . . In 1990, Congress amended § 1328(a) to restrict the dischargeability of certain student loan debts. . . . After these amendments, creditors holding non-dischargeable student claims may legally take action to collect on their claims after a chapter 13 case is completed and a discharge has been granted. Obviously, those creditors holding discharged claims may not. Thus, a creditor holding a non-dischargeable student loan claim is more likely to be repaid than a creditor holding a dischargeable, unsecured claim. It would seem unfair to tell creditors holding dischargeable claims that other creditors who hold non-dischargeable claims (and who may thus pursue post-bankruptcy collection efforts against the debtor) are to be preferred not only after the bankruptcy case is completed, but also during the time payments are being made to creditors. . . . Student loan debts can be viewed differently from restitution and ‘drunk driving’ debts. . . . The fact that Congress has not provided priority treatment for student loan debts either in § 507 or § 1322(b)(1) is some indication that Congress did not intend such debts to be separately classified from other unsecured debts and be given preferential treatment. . . . [T]here would seem to be less need to separately classify student loan claims than to separately classify other non-dischargeable debts since an escape valve is provided for in the ‘undue hardship’ language in § 523(a)(8). . . . [I]t might be appropriate to prefer a claim for restitution or familial support if the alternative is that the debtor will be sent to jail and the plan will therefore fail. But this rationale would not seem to apply to student loan claims since the failure to pay such a claim would not normally interfere with the debtor’s livelihood. Classification of claims for different treatment will always intrude upon one of the fundamental principles of bankruptcy: similar treatment for similarly situated creditors. The theory that classification may only be permitted in order to protect the viability of the plan, however, limits the extent of the intrusion. . . . [T]his court believes it was not Congress’s intent in excepting certain student loans from discharge to thereby allow such loans to be separately classified under § 1322(b)(1) for preferential treatment to the detriment of other non-priority, unsecured claim holders.”); In re Lewman, 157 B.R. 134, 136 (Bankr. S.D. Ind. 1992) (Court denies confirmation of plan that would pay approximately 10% of general unsecured claims and 100% of educational loans guaranteed by the debtors. “Since education related debts were made nondischargeable in Chapter 13, courts have been faced with the question of whether the debtor may classify these debts separately from other unsecured debts and pay a greater dividend. . . . The courts have shown a clear trend to deny confirmation of such plans, finding the proposed classification to be unfair discrimination. . . . [T]he Court is aware of no case in which a debtor has been allowed to pay a higher dividend on student loans compared to other unsecured debts solely because of their nondischargeability. . . . Even assuming that the [education loan] is nondischargeable, that fact alone would not support separate classification and more favorable treatment than other unsecured debts. Dischargeability will become an issue only when the Debtors are eligible for discharge, which will be on completion of a Chapter 13 plan.”); In re Christophe, 151 B.R. 475, 478–80 (Bankr. N.D. Ill. 1993) (Court denies confirmation of 56-month plan that would pay 100% of nondischargeable student loan and 32% of general unsecured claims. Citing and discussing In re Lawson, 93 B.R. 979 (Bankr. N.D. Ill. 1988), In re Boggan, 125 B.R. 533 (Bankr. N.D. Ill. 1991) and In re Chapman, 146 B.R. 411 (Bankr. N.D. Ill. 1992), and applying four-part test discussed by the Eighth Circuit in Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991), “the special rights of student loan creditors may in some circumstances form a reasonable basis for allowing a debtor to treat such creditors favorably. . . . The law has changed since Lawson was issued. The Bankruptcy Code has since been amended to make student loans nondischargeable. . . . [D]ebtors may now discriminate to some degree in favor of student loan creditors because such discrimination is necessary to consummate a Chapter 13 plan. . . . [D]ebtors should not engage in any discrimination beyond what is necessary to accomplish the reasonable goal behind the discriminatory treatment. . . . A student loan is generally paid off in monthly installments over a long period of years. . . . Therefore, § 1322(b)(5) would be directly applicable to cure arrearages in these loans. . . . However, even when an arrearage is present, there may still be no justification for the 100% payment of the student loan at the expense of other unsecured creditors. . . . [T]he reasonable basis for the disparate treatment of student loan creditors is to prevent them from derailing the Chapter 13 plan. This goal is accomplished when the student loan creditor receives what it is entitled to receive under its loan agreement. . . . If the student loan creditor is not entitled to 100% repayment of its loan before the scheduled completion of the Chapter 13 plan, then the plan which pays 100% of that student loan during that period would accelerate payment of the student loan debt. That would be unfair to other unsecured creditors, because the debtor would be forcing them to bear the cost of early payment of the student loan without a corresponding justification.” Court rejects debtor’s argument that she is not taking payments away from other unsecured creditors because she extended the plan 20 months to 56 months: “[T]his argument fails because the amount of money available to creditors is still fixed as a set amount regardless of whether the Plan calls for 36 or 56 monthly payments. Debtor’s plan would result in $9,300 being paid to the student loan creditor. That sum could have been distributed pro rata to all the unsecured creditors, and this aspect is not changed by the addition of 20 more payments to the plan.”); In re Tucker, 150 B.R. 203, 205 (Bankr. N.D. Ohio 1992) (Court denies confirmation of 48-month plan separately classifying nondischargeable student loans for 100% payment and 5% payment to general unsecureds. “[This court] agrees with the holding of [In re Saulter, 133 B.R. 148 (Bankr. W.D. Mo. 1991),] and similar cases which prohibit any separate classification of student loan obligations in a Chapter 13 plan at the expense of general unsecured creditors. Congress acted affirmatively in 1990 to make Section 523’s ban against discharging most student loans applicable in Chapter 13. It must be presumed to have been aware that it had earlier acted, in Section 1322(b)(1), to prohibit unfair discrimination against any class a debtor might designate in a plan. . . . [T]he debtor here clearly discriminates among his unsecured creditors. His only basis for doing so appears to rest in the student loans’ nondischargeability. That, as Saulter suggests, is the debtor’s problem which he cannot foist off on his other unsecured creditors.”); In re Chapman, 146 B.R. 411, 417, 417–19 (Bankr. N.D. Ill. 1992) (Applying four-part test, “there is no reasonable basis for the debtor to discriminate against the general unsecured claims class by paying the student loan class in full while paying the general unsecured claims class only ten percent.” Nondischargeable student loan claims “enjoy no statutory priority over other unsecured claims. . . . If this court allowed the debtor to pay the nondischargeable student loan debt in full while paying the general unsecured claims 10% . . . the debtor would be . . . equitably subordinating 90% of the claims of those creditors holding dischargeable claims. . . . This is, of course the result that [Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426 (7th Cir. 1982),] and [In re Smith, 848 F.2d 813 (7th Cir. 1988),] both suggest in dictum. However, the result would clearly be unfair. . . . [E]quitable subordination requires wrongdoing by the creditor whose claim is to be equitably subordinated. . . . There is no suggestion here that the debtor’s creditors holding claims dischargeable in Chapter 13 have been guilty of any wrongdoing that would justify the subordination of their claims to those of holders of nondischargeable claims. . . . When Congress amended the Bankruptcy Code in 1990 and made student loans nondischargeable under § 523(a)(8), Congress could have amended § 1322 of the Bankruptcy Code by providing for special classification and treatment of student loans, as it did with cosigned consumer debts in 1984, or Congress could have made payment of student loans a priority in Chapter 13. Congress chose to do neither, leading this court to conclude that student loans are not to be favored in a Chapter 13 plan. . . . The court recognizes that its analysis in this case differs with the conclusion reached by its colleague Judge Wedoff in . . . In re Lawson, 93 B.R. 979 (Bankr.N.D.Ill. 1988). . . . Judge Wedoff’s definition of fairness would sanction virtually any Chapter 13 plan that provided preferential treatment for debts nondischargeable in a Chapter 13 case. . . .[T]he Lawson approach overlooks the fact that the concept of unfair discrimination as set forth in § 1322 is a creditor protection device. . . . [T]he proposed discrimination is unreasonable in that it benefits only the debtor at the expense of the creditors.”); In re Liggins, 145 B.R. 227, 231 (Bankr. E.D. Va. 1992) (“Since the 1990 Bankruptcy Code amendment, education loans are generally excepted from discharge in chapter 13 cases. . . . [T]he nondischargeability of education debt does not justify a discriminatory payment classification for education debt in a chapter 13 plan.”); In re Keel, 143 B.R. 915, 916–17 (Bankr. D. Neb. 1992) (Applying four-part test, “[a]lthough separate classification of the student loans is permissible, the student loan must be paid the same pro rata amount as other unsecured creditors.” Distinguishing the treatment of child support in Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991), because the holder of a student loan is forbidden by the automatic stay to collect its debt, student loans “should be contrasted with alimony, maintenance and support obligations. . . . [I]t would be virtually impossible to propose a successful Chapter 13 plan, which did not provide for payment in full of alimony, support, or maintenance. . . . There is nothing to suggest that non-payment of student loans would make it impossible for the debtor to complete a Chapter 13 plan. . . . In the case of student loans, a debtor should never be permitted to accelerate payments on the student loans to the detriment of unsecured creditors. At most, a Chapter 13 debtor should be permitted to make the minimum payments required under the terms of the student loans.”); In re Taylor, 137 B.R. 60, 64–65 n.6 (Bankr. W.D. Okla. 1992) (It is unfair discrimination to separately classify nondischargeable student loan for payment in full without interest after completion of partial payment of other unsecured claims. All unsecured claims, including the student loan, would receive 34.56% during the first 36 months of the plan. After 36 months, the plan would extend an additional seven months, or as long as necessary, to pay nondischargeable student loans in full. Debtor’s counsel argued that the debtor needed the protection of the automatic stay for the additional seven months to permit payment of the student loan in full, but conceded that the more important reason for the classification was to pay the student loan in full without interest. “[H]ere the discrimination does not surface until after 36 months. . . . [T]he fact remains however that debtors will be making payments attributable to the student loan obligations after they have ceased making any payments attributable to their other unsecured debts, and they will at the conclusion of the case have paid the former in full while discharging the unpaid remainder of the latter. This is clearly discriminatory. . . . It is unfairly so. . . . It is this court’s view that a ‘bright line’ should be drawn to prohibit in a Chapter 13 plan, any discrimination in favor of nondischargeable student loan obligations over other unsecured creditors.” In a footnote, the court is “in agreement with the court in [In re Storberg, 94 B.R. 144 (Bankr. D. Minn. 1988)] . . . that public policy favors providing for spousal and child support. Student loan obligations neither possess nor warrant equivalent public policy considerations.”); In re Saulter, 133 B.R. 148, 149–50 (Bankr. W.D. Mo. 1991) (Applying four-part test, it is unfair discrimination to separately classify nondischargeable student loan creditors for 100% payment and 10% payment to other unsecured creditors. “The basis for the discriminatory treatment in debtor’s plan appears to be the fact that the student loan indebtedness is not dischargeable. . . . In essence, debtor’s plan shifts the student loan nondischargeability burden from herself on to her general unsecured creditors by paying them less during the course of her plan so that she might repay her full student loan indebtedness. . . . There is nothing to stop debtor from carrying out a plan without such unfair discrimination. Debtor need only formulate a plan which treats her student loans as long term indebtedness under § 1322(b)(5). Even though such treatment may require treating student loans differently than other unsecured debt, it cannot be said that it would unfairly discriminate because the treatment would be in full accordance with Code provisions. . . . Any other treatment that discriminates in favor of student loan creditors at the expense of the other unsecured creditors where the final scheduled student loan payment falls due after the date of the plan is unfairly discriminatory.”); In re Tucker, 130 B.R. 71, 73 (Bankr. S.D. Iowa 1991) (Applying four-factor test, court denies confirmation of plan that proposed to pay nondischargeable student loan creditors 100% and nothing to other unsecured claim holders. “Congress amended 11 U.S.C. § 1328(a)(2) to provide that student loans in Chapter 13 cases filed after November 5, 1990 are only dischargeable if the requirements of 11 U.S.C. § 523(a)(8) are met. . . . Debtor’s Chapter 13 case was filed November 9, 1990. One might argue, as a result of the amendment, a debtor’s discrimination against non-student loan unsecured creditors will always have a reasonable basis because the debtor’s student loan creditors will, unless the conditions in 11 U.S.C. § 523(a)(8) are met, have recourse against debtors. . . . This court, however, finds that the fact that the requirements of 11 U.S.C. § 523(a)(8) now apply in Chapter 13 does not necessarily give the debtor a reasonable basis for favoring student loan creditors over other unsecured creditors. This court holds that the debtor in these circumstances still must show that the discrimination has a reasonable basis beyond the fact that student loan obligations are dischargeable only to the extent allowed by § 523(a)(8). . . . Discriminatory treatment of claims has been allowed . . . when the discrimination is related to the debtor’s objective interests in completing the plan and obtaining a fresh start or maintaining a decent quality of life.”); In re Scheiber, 129 B.R. 604, 606–07 (Bankr. D. Minn. 1991) (It is unfair discrimination to pay student loan in full and 3.5% to other unsecured claim holders notwithstanding that Congress amended § 1328(a)(2) to except educational loans from discharge. A level payment plan would pay approximately 50% of all unsecured claims. Court distinguishes In re Storberg, 94 B.R. 144 (Bankr. D. Minn. 1988), in which the debtors were permitted to separately classify a child support arrearage for 100% payment and payment of 18% to other unsecured claim holders. “The focal point was the nature of the creditor and the nature of the debt. The best interests of the debtor should not be determinative in deciding whether the plan unfairly discriminates against any class. . . . [I]n Storberg, the strong public policy of ensuring the support of children was the major focus. . . . [T]hat Congress amended § 1328(a)(2) to except from discharge educational loans . . . indicates that Congress insists that debtors repay their student loans, but this does not evidence a position as favored in public policy as are alimony and child support payments. . . . If all non-priority unsecured creditors shared equally, both the debtors and the creditors would benefit significantly. . . . [U]nsecured creditors will have received approximately 50% of their claims rather than 3.5%. The remaining 50% of the unsecured debt, except the student loan obligation, will be discharged and the debtors will have paid approximately 50% of their nondischargeable student loan obligations. This will leave the debtors with a student loan debt . . . to continue repaying once their Chapter 13 plan has been completed.”).

 

34  See Groves v. LaBarge (In re Groves), 39 F.3d 212, 218 (8th Cir. 1994) (“[T]he nondischargeability of student loan claims, by itself, does not justify substantial discrimination against other, dischargeable unsecured claims in a Chapter 13 plan.”); Labib-Kiyarash v. McDonald (In re Labib-Kiyarash), 271 B.R. 189, 195–96 (B.A.P. 9th Cir. 2001) (“[I]n accordance with [McDonald v. Sperna (In re Sperna), 173 B.R. 654 (B.A.P. 9th Cir. 1994),] the nondischargeable nature of the [student loans] is alone an insufficient basis for separately classifying the Loans.”); Bentley v. Boyajian (In re Bentley), 266 B.R. 229, 239–42 (B.A.P. 1st Cir. 2001) (“[S]tudent loan obligations are not debts to which the Code grants priority. . . . They are indeed excepted from discharge, but . . . nondischargeability is not, and does not entail, priority as to any distribution in or through bankruptcy.”); Eck v. Willis (In re Willis), 197 B.R. 912, 915 (N.D. Okla. 1996) (“The sole ground asserted by the debtor for the separate treatment of student loans is that the loans are nondischargeable. This reason focuses solely upon the interests of the debtor, and, simply put, does not justify the discriminatory treatment . . . . Absent some other justification for the discriminatory treatment, the Court cannot affirm the approval of a Chapter 13 Plan permitting the disparate treatment of student loans and other unsecured debts.”); In re Mason, 300 B.R. 379, 385 (Bankr. D. Kan. 2003) (“[T]he mere fact that student loan claims are not dischargeable is an insufficient basis for discrimination.”); In re Simmons, 288 B.R. 737, 748 (Bankr. N.D. Tex. 2003) (“The mere fact that debts from student loans are not dischargeable is not sufficient basis for an exception to the plainly stated test of section 1322(b)(1).”); In re Colley, 260 B.R. 532, 538 (Bankr. M.D. Fla. 2000) (“The Court will not allow student loan debtors to make an end run around § 1322(b)(1) by using § 1322(b)(5) as a pretense for classification where nondischargeability must be the true motivation for discrimination. . . . [N]ondischargeability is not a ‘fair’ basis for discrimination.”); In re Thibodeau, 248 B.R. 699, 706 (Bankr. D. Mass. 2000) (“[I]t is obviously in the Debtor’s interest to reduce the amount of nondischargeable debt remaining after the completion of her Chapter 13 Plan. . . . [W]here a mixed motive exists for the separate classification, discriminatory treatment will not be permitted under the guise of § 1322(b)(5).”); In re Coonce, 213 B.R. 344, 346 (Bankr. S.D. Ill. 1997) (“[D]iscrimination in favor of educational loans based on their nondischargeable nature is unfair and, therefore, violates § 1322(b)(1). . . . [F]rom the perspective of unsecured creditors holding dischargeable claims, it would be patently unfair for creditors holding nondischargeable claims—who may thus pursue post-bankruptcy collection efforts against the debtor—to be preferred not only after the bankruptcy case is completed but also during the time payments are being made to creditors.”). Accord McDonald v. Sperna (In re Sperna), 173 B.R. 654 (B.A.P. 9th Cir. 1994); In re Anderson, 173 B.R. 226 (Bankr. D. Colo. 1993); In re Chapman, 146 B.R. 411 (Bankr. N.D. Ill. 1992); In re Keel, 143 B.R. 915 (Bankr. D. Neb. 1992); In re Saulter, 133 B.R. 148 (Bankr. W.D. Mo. 1991); In re Tucker, 130 B.R. 71 (Bankr. S.D. Iowa 1991).

 

35  In re Scheiber, 129 B.R. 604 (Bankr. D. Minn. 1991). Accord In re Coonce, 213 B.R. 344, 346 (Bankr. S.D. Ill. 1997) (“[F]rom the perspective of unsecured creditors holding dischargeable claims, it would be patently unfair for creditors holding nondischargeable claims—who may thus pursue post-bankruptcy collection efforts against the debtor—to be preferred not only after the bankruptcy case is completed but also during the time payments are being made to creditors.”).

 

36  In re Chapman, 146 B.R. 411, 418 (Bankr. N.D. Ill. 1992). See also In re Coonce, 213 B.R. 344, 348 (Bankr. S.D. Ill. 1997) (“[A]llowing the debtors to discriminate in favor of student loan creditors would, in effect, create an artificial priority scheme not provided for in § 507(a).”).

 

37  See §§ 152.2 [ Alimony, Maintenance and Support ] § 88.4  Alimony, Maintenance and Support and 345.1 [ Alimony, Maintenance or Support ] § 158.1  Alimony, Maintenance or Support.

 

38  In re Keel, 143 B.R. 915 (Bankr. D. Neb. 1992).

 

39  In re Scheiber, 129 B.R. 604, 606 (Bankr. D. Minn. 1991). Accord In re Bentley, 250 B.R. 475, 478 (Bankr. D.R.I. 2000) (Unfair discrimination to pay 100% of nondischargeable student loan and 5% to a class of unsecured creditors. “Public policy normally favors discriminating in favor of child support claims because a child’s needs generally exceed those of the unsecured creditor. . . . The Debtors point to no authority, nor are we able to equate the rights of a child support creditor with those of a student loan creditor under this section of the Code. . . . [T]o separately classify and treat unsecured student loans differently from other unsecured creditors for the reason that the student loan debt is nondischargeable, constitutes unfair discrimination and violates the provisions and the spirit of 11 U.S.C. § 1322(b)(1).”), aff’d, 266 B.R. 229 (B.A.P. 1st Cir. 2001); In re Williams, 253 B.R. 220, 228–33 (Bankr. W.D. Tenn. 2000) (“Unlike claims for child and spousal support, student loan claims do not enjoy a statutory priority for distribution.”); In re Gonzalez, 206 B.R. 239, 240–42 (Bankr. S.D. Fla. 1997) (“[C]ertain discriminations have greater public policy considerations than others. For instance, child support claims may be discriminated and paid in full while the general unsecured creditors receive only a percentage of their claim. . . . Debtors have not brought about a public policy argument that dictates that the student loan creditors’ rights exceed those of the general unsecured creditors. . . . The majority position does not permit discrimination for the nondischargeable student loan debt.”); In re Goewey, 185 B.R. 444, 447 (Bankr. N.D.N.Y. 1995) (“Although student loans are nondischargeable, they do not possess the same fundamental societal importance as nondischargeable child support or maintenance.”); In re Taylor, 137 B.R. 60, 65 n.6 (Bankr. W.D. Okla. 1992) (“[P]ublic policy favors providing for spousal and child support. Student loan obligations neither possess nor warrant equivalent public policy considerations.”).

 

40  See 11 U.S.C. § 507(a)(7), discussed in §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2  What Claims Are Priority Claims?, 152.2 [ Alimony, Maintenance and Support ] § 88.4  Alimony, Maintenance and Support and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994. See, e.g., In re Eiland, 170 B.R. 370, 373 (Bankr. N.D. Ill. 1994) (Debtor cannot separately classify a nondischargeable student loan as a “priority” claim to be paid in full in advance of other unsecured claim holders. “Since Congress did not give priority to [student] loans under § 507, a debtor may not do so in order to avoid [§ 523(a)(8)] and the standards for separate classification under § 1322(b)(1).”).

 

41  39 F.3d 212 (8th Cir. 1994).

 

42  39 F.3d at 215–16 (emphasis added).