602 B.R. 831
Bankr. D. Mass.2019Background
- Debtor Greer‑Allen took three private student loans (2004–2006) via an online portal; loans were labeled part of the "Education One Undergraduate Loan Program."
- Loan documents stated each loan "is guaranteed by The Education Resources Institute, Inc. (TERI), a nonprofit institution."
- Bank One originated the first loan; JPMorgan Chase originated the second and third; all loans were later assigned to National Collegiate Student Loan Trusts (NCSLT).
- Debtor filed Chapter 7 in 2017 and received a general discharge; adversary proceeding seeks determination that these loans were discharged.
- Defendants moved for summary judgment arguing 11 U.S.C. § 523(a)(8)(A)(i) (loans made under a program funded in whole or in part by a nonprofit) makes the loans nondischargeable; court found the record (guaranty, trust agreements, loan forms) established TERI was a nonprofit and funded the program by guaranty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the loans "educational loans" under § 523(a)(8)? | Loans were not exclusively educational because some proceeds used for non‑educational purposes. | Loans were taken to fund Northeastern studies and thus are educational. | Held: Loans are educational; courts look to loan purpose. |
| Were the loans "made under a program"? | Debtor questioned whether a program existed beyond form language. | Loan docs, servicer affidavit, and trust agreements show loans were issued under the Education One program. | Held: Loans were made under a program. |
| Was the program funded in whole or in part by a nonprofit institution? | Debtor urged TERI may not have funded the program and contended "nonprofit institution" should mean only nonprofit educational institutions. | Defendants produced TERI guaranty, trust schedules, and organizational references showing TERI was a nonprofit that guaranteed (thus funded) the program. | Held: TERI was a nonprofit and funded the program by guaranty; § 523(a)(8)(A)(i) applies. |
| Are the loans dischargeable due to undue hardship or statutory exceptions? | Debtor did not invoke successful undue hardship or other applicable statutory exception. | Defendants argued nondischargeability under § 523(a)(8). | Held: No undue hardship claimed; loans are nondischargeable under § 523(a)(8)(A)(i). |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (establishes preponderance standard for creditor to prove nondischargeability)
- O'Brien v. New England Educational Credit Union, 419 F.3d 104 (2d Cir. 2005) (program-level funding, not individual loan, controls § 523(a)(8) analysis)
- Hyman v. I.R.S., 502 F.3d 61 (2d Cir. 2007) (§ 523(a) exceptions construed narrowly)
- Mesnick v. General Electric Co., 950 F.2d 816 (1st Cir. 1991) (summary judgment standard—need more than rhetoric)
- Bronsdon v. Educ. Credit Mgmt. Corp., 435 B.R. 791 (1st Cir. BAP 2010) (lender bears initial burden to show debt is excepted under § 523(a)(8))
- In re Hammarstrom, 95 B.R. 160 (Bankr. N.D. Cal. 1989) (a nonprofit's guaranty can show it meaningfully funded a loan program)
- In re Page, 592 B.R. 334 (B.A.P. or bankruptcy court authority cited for looking to loan purpose to determine "educational loan")