553 B.R. 144
Bankr. D. Alaska2016Background
- Debtor attended St. George University School of Veterinary Medicine (offshore) 2004–2007 and borrowed roughly $149,198 to fund his education.
- Loans were originated by Richland State Bank (a for-profit bank) and shortly thereafter assigned to nonprofit defendants who participated in a secondary-market financing program.
- Defendants are nonprofit 501(c)(3) corporations that purchased/securitized the loans; affidavits and loan documents state the loans were made for educational purposes.
- Debtor sued seeking discharge of the student-loan debt, arguing the loans do not fall within the nondischargeable categories of 11 U.S.C. § 523(a)(8).
- Defendants moved for summary judgment arguing the loans are nondischargeable under three separate § 523(a)(8) subsections: (A)(i) program funded in whole/part by a nonprofit, (A)(ii) obligation to repay funds received as an educational benefit, and (B) qualified education loan under IRC § 221(d)(1).
- Court denied debtor’s summary judgment and granted defendants’ cross-motion, concluding the loans are nondischargeable under § 523(a)(8).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loans are "made under any program funded in whole or in part by a nonprofit institution" (§ 523(a)(8)(A)(i)) | Loans were originated by a for‑profit bank (Richland), so they are not "made by" a nonprofit and thus not covered. | Loan program structure shows nonprofits funded/took out the loans via secondary-market purchases; program funding by nonprofits qualifies. | Held: Program funding by the nonprofit defendants qualifies the loans under § 523(a)(8)(A)(i). |
| Whether debt qualifies as an obligation to "repay funds received as an educational benefit, scholarship, or stipend" (§ 523(a)(8)(A)(ii)) | Debtor contends the statutory text contemplates funds received directly by the student, not merely payments to the school. | Loan documents and payments to the school to fund the debtor’s education create an obligation to repay funds received for educational benefit. | Held: Payments made to the school under the program satisfy § 523(a)(8)(A)(ii). |
| Whether loans are a "qualified education loan" under IRC § 221(d)(1) and thus nondischargeable under § 523(a)(8)(B) | Debtor argues St. George (an offshore, non‑accredited school) is not an "eligible institution" under incorporated definitions, so loans are not "qualified." | Statutory definitions (incorporating HEA provisions and regulations) cover certain foreign veterinary schools whose students complete U.S. clinical training; the nested definitions render these loans "qualified education loans." | Held: Under the statutory chain and applicable regulations, loans qualify as "qualified education loans" for § 523(a)(8)(B). |
| Whether disputed factual issues (e.g., actual use of funds, nonprofit status) preclude summary judgment | Debtor asserts factual disputes (use of proceeds, reliance on assignment) require trial. | Defendants show undisputed documentary evidence of program structure, nonprofit status, and stated educational purpose; intended use controls. | Held: No genuine dispute of material fact; record supports summary judgment for defendants. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard) (establishes burden and standard for genuine dispute of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard) (party moving for summary judgment need not produce evidence negating opponent's claim)
- In re Christoff, 527 B.R. 624 (9th Cir. BAP 2015) (interpretation of § 523(a)(8) post‑BAPCPA and discussion of what constitutes funds "received" for educational benefit)
- In re Busson-Sokolik, 635 F.3d 261 (7th Cir. 2011) (loan purpose and stated purpose of loan documents relevant to § 523(a)(8) analysis)