Brown v. Rust (In re Rust), 510 B.R. 562

Brown cosigned a $30,000 Education One undergraduate loan (Bank One) for Rust in Sept. 2002; Brown received none of the proceeds.
Rust defaulted; Brown paid the loan in full pre-petition ($25,337.33 total, with earlier small payments) to stop collection and then obtained a state-court default judgment against Rust for that amount.
Rust filed Chapter 7 bankruptcy; Brown sued in adversary proceeding seeking a declaration that the debt is nondischargeable under 11 U.S.C. § 523(a)(8).
The Credit Agreement expressly stated proceeds were for educational expenses and referenced § 523(a)(8) and a guaranty.
Disputed legal question: whether Brown — who signed as “Cosigner” — is an accommodation party/subrogee (entitled to step into lender’s shoes) so his claim is an “obligation to repay funds received as an educational benefit” under § 523(a)(8)(A)(ii).
Court found Brown at least an accommodation party, awarded summary judgment, and held the $25,337.33 debt (plus interest) nondischargeable under § 523(a)(8)(A)(ii).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Rust owes Brown a debt	Brown: state-court default judgment establishes debt of $25,337.33	Rust: conceded existence of obligation at oral argument	Held: debt exists (judgment creditor); Rust owes $25,337.33 plus interest
Whether the debt is nondischargeable under § 523(a)(8)	Brown: as an accommodation party/subrogee, his payment enforces an obligation to repay funds received as an educational benefit under § 523(a)(8)(A)(ii)	Rust: contends characterization places debt outside § 523(a)(8) (argues cosigner/coborrower or that proceeds were not educational)	Held: Credit Agreement and parties’ intent show loan was for educational benefit; Brown is at least an accommodation party and his claim is nondischargeable under § 523(a)(8)(A)(ii)

Boston Univ. v. Mehta, 310 F.3d 308 (3d Cir. 2002) (statutory discharge exceptions construed narrowly but § 523(a)(8) reflects congressional intent to limit discharge of educational loans)
Pelkowski v. Violation (In re Pelkowski), 990 F.2d 737 (3d Cir. 1993) (rules on construing § 523 exceptions against creditor and in favor of debtor)
Gorosh v. Posner (In re Posner), 434 B.R. 800 (Bankr. E.D. Mich. 2010) (cosigner characterized as coborrower; implications for § 523(a)(8) claims)
Benson v. Corbin (In re Corbin), 506 B.R. 287 (Bankr. W.D. Wash. 2014) (accommodation party’s subrogation claim held nondischargeable under § 523(a)(8)(A)(ii))
Murphy v. Pennsylvania Higher Ed. Ass’n (In re Murphy), 282 F.3d 868 (5th Cir. 2002) (educational loans may include living or other expenses)