ISSUE
The matter before the Court is an adversary complaint filed by Sioux Falls, South Dakota, Attorney Cecelia A. Grunewaldt on behalf of Plaintiff-Debtor [hereinafter “Debtor”] seeking a determination of dis-chargeability which raises the following issue: whether a non-student debtor who cosigned applications for a former spouse’s educational loans is subject to the exception to discharge provision of 11 U.S.C. § 523(a)(8). Debtor maintains the provision does not apply when a non-student cosigner receives no funds or educational benefits from student loan proceeds. In resistance, Aberdeen, South Dakota, Attorney Jeffrey T. Sveen on behalf of Defendant Student Loan Finance Corporation, f/d/b/a South Dakota Student Loan Corporation, and Sioux Falls, South Dakota, Attorney Terry N. Prendergast on behalf of Pennsylvania Higher Education Assistance Agency [hereinafter “PHEAA”] as assign-ee/guarantor of Defendant Student Loan Finance Corporation filed answers stating funds were disbursed for the intent of student loans and educational benefits, therefore, the debts are nondischargeable under the provisions of the Bankruptcy Code. This Memorandum Decision shall constitute Findings of Fact and Conclusions of Law as required by Federal Rule of Bankruptcy Procеdure 7052. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(1).
FACTS AND PROCEDURAL BACKGROUND
In 1988 and 1989, Debtor co-signed financial aid applications completed and submitted by her spouse, Gerald Haddican, for the purpose of financing his post-secondary education at Dakota State University in Madison, South Dakota.
1
The couple divorced in 1992, and on August 17 of that year, Debtor filed a Chapter 7 petition for relief followed by the filing of this complaint November 16, 1992. The adversary action was filed to determine that the indebtedness arising from the two federally insured loans is dischargeable based on the theory that 11 U.S.C. § 523(a)(8) does not apply to situations where nоn-student debtors cosign applications for student loans that are subsequently approved, disbursed to, and utilized by former spouses. On December
COMPETING ARGUMENTS
Debtor states the majority view concerning this issue is espoused in
In re Boylen,
In reply, PHEAA rejects the allegation that
In re Boylen
and its progeny represent the majority position regarding application of Section 523(a)(8) and, instead, contends this position has been universally rejected — noting that the
Boylen
court itself rejected this line of authority when it ruled in
In re Dull,
In an effort to persuade the Court to adhere to this “more recent” line of authority, PHEAA emphasizes that a policy of nondischargeability of educational debts was a pre-Code priority of Congress that was eventually incorporated into the Bankruptcy Code via the Bankruptcy Reform Act of 1978. 4 Since its original inclusion into the Bankruptcy Code, the statute has been modified, but always in an expansivе manner, and always broader than its pre-Code predecessor. 5 , PHEAA believes this evidence supports a non-limiting application of the statute and, in sum, refutes Debtor’s position as simply contrary to Congress’ intent by arguing that a determination that the debt is dischargeable “would endanger various federal, state and private nonprofit educational loan programs that Congress sought to encourage.”
Debtor’s response to PHEAA’s reply steadfastly adheres to the specific ruling of
In re Boylen
and reminds the Court that a finding of undue hardship does not dilute the conclusion that Congress never intended Section 523(a)(8) to apply to a co-maker’s liability on student loan debts. Debtor also disputes any notion that the
Boylen
court was the same court that decided the case of
In re
Dull
6
wherein co-maker liability was
APPLICABLE LAW
This controversy requires an interpretation of 11 U.S.C. § 523(a)(8) that is consistent with congressional intent. The resolution will require the Court to consider various aspects of the statute: its enactment, its intended goals, and the source of its interpretative problems when applied by other bankruptcy courts.
A. Enacting 11 U.S.C. § 523(a)(8)
In 1965, the Higher Education Act was enacted along with the Guaranteed Student Loan Program “to strengthen the educational resources of our colleges and uni-versifies and to provide financial assistance for students in post-secondary and higher education” by making reasonably low interest rates accessible. S.Rep. No. 673, 89th Cong., 1st Sess. 1 (1965), reprinted in 1965 U.S.Code Cong. & Admin.News 4027, 4030. The Guaranteed Student Loan Program is able to provide lower interest rates since educational loans from banks, credit unions, and educational institutions are insured by the U.S. Department of Education or by state agencies оr nonprofit organizations and reinsured by the U.S. Department of Education. 20 U.S.C. §§ 1078, 1084, 1085(d) (1988); see H.R.Rep. No. 595, 95th Cong., 2d Sess. 135, 140 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6096, 6101. The lender is entitled to be repaid from the federal government should the debtor die, become disabled, or is allowed to discharge the obligation through, bankruptcy. 20 U.S.C. § 1087.
In order to ease some of the tension mounting because the Bankruptcy Act did not specifically except educational loans from discharge,
8
the Higher Education Act was amended.
9
3 L. King,
Collier on Bankruptcy
H 523.18, at 523-147, -148 (15th ed. 1993). This amendment excepted any educational loans “insured or guaranteed” under the Higher Education Act from discharge in bankruptcy unless the debtor could show that the loan came due more than five years before the petition was filed or could show that excepting the debt from discharge would cause undue hardship.
Id.
Pressure remained, however, to integrate a similar provision in bankruptcy, and so when Congress dealt with and considered the extensive 1978 legislative revisions of the bankruptcy laws, an
B. The Goals of 11 U.S.C. § 523(a)(8)
Statements from the primary sponsor of Section 523(a)(8), Representative Ertel of Pennsylvania, indicate that preserving the financial integrity of educational loan programs was paramount:
The purpose of this рarticular amendment is to keep our student loan programs intact. As many Members know, the default rate in the student loan program has been escalating to tremendous proportions in the past year. In accordance with that, the number of students going into bankruptcy — or ex-students— has increased over the years 1965 through 1972, by 1,200 percent for the years 1972 through 1975.
What happens with these programs is that as people borrow the money, go to school and then repay it to the educational institution, when it becomes due approximately 1 year after completion of school. After repaying this loan, this monеy goes into a revolving fund which is then available for other students on down the line. When they default and do not pay, and eventually reach the bankruptcy state, we are penalizing students who are coming along through the system.
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... Without this amendment, we are discriminating against future students, because there will be no funds available for them to get an education.
124 Cong.Rec. 1791 (1978) (remarks of Rep. Ertel). One way to ensure the ongoing integrity of student loan programs was to set a second goal that would curb abusive practices by debtors seeking to discharge their loan obligations by filing bankruptcy. Congress intended Section 523(a)(8) to fulfill “the twin goals of resсuing the student loan program from fiscal doom and preventing abuse of the bankruptcy process by undeserving debtors.”
In re Pelkowski,
As noted by PHEAA, 12 Section 523(a)(8) has been modified on several occasions to broaden and expand its application in an attempt to ensure these tandem goals are met. 13 Currently, the statute states:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
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(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds rеceived as an educational benefit, scholarship or stipend, unless—
(A) such loan, benefit, scholarship, or stipend overpayment first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents.
11 U.S.C. § 523(a)(8). In general, then, educational loans are not dischargeable unless loans that have been outstanding for more than seven years would cause undue hardship if exceptеd from discharge. Metaphorically speaking, one author has summarized the results of the modification process as follows: “Not only has the preamble in subsection (8) been expanded to catch more fish in its non-dischargeability net, but also subsection (8) has been narrowed to keep the fish from escaping through the net.” Epstein, Nickles & White, Bankruptcy: Practitioner Treatise Series, Vol. 2, § 7-33, at 395 (West 1992).
C. Interpreting and Applying 11 U.S. C. § 523(a)(8)
Case law amply demonstrates the long-term, widespread gap among bankruptcy courts regarding interpretations of Section 523(a)(8) as applied to non-student debtors. The clean split of authority presents two sides: on one side are courts that believe the statute is meant to be “all-inclusive,” and on the other are courts that believe the statute is meant to apply to student debtors only.
14
The crux of the problem lies with two constructions of the statute using the plain meaning rule which states, “[T]he plain meaning of legislation should be conclusive, except in the ‘rare cases in which the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.' ”
United States v. Ron Pair Enterprises, Inc.,
Courts favoring the all-inclusive approach find the statutory language of Section 523(a)(8) unаmbiguous since reference is simply made to the nondischargeability
Not unlike other courts previously deciding this issue, this Court finds it logical and appropriate to resolve the dispute in this case by making an inquiry of the statute itself, pursuant to the plain meaning rule, in order to decide if a determination of nondischargeability of a non-student debt- or’s liability as co-signer for a former spouse’s student loans is “absurd” and, if so, whether it is a reasonable alternative to find Section 523(a)(8) applicable to student debtors only.
United States v. Ron Pair Enterprises, Inc.,
ANALYSIS
Primarily, Debtor argues that Section 523(а)(8) is inapplicable since she was not a student and not a beneficiary of educational loans but, rather, was merely a co-signer of student loan applications. Supported by case law that hinges on courts finding legislative intent “frustrated” and absurd re-suits produced when applied to co-maker liability, Debtor concludes she is not “the person Congress intended to except from dischargeability in a bankruptcy situation,” therefore, this debt should not be excepted from discharge. This rationale suggests there is an ambiguity in the silence of Section 523(a)(8) that requires the Court to go beyond the statutory language and loоk toward congressional intent in the hope that the Court will conclude the statute was designed to target debtors because they are students, rather than debtors because they owe student loan debt. True, this position has attracted a number of courts to the point of persuasion,
15
but this Court finds no ambiguity in the fact that the nondischargeability described in this provision is silent as to the status of the borrowing debtor.
In re Pelkowski,
990 F.2d at *741. Nor is there any ambiguity found in the language that is presented in the text of the statute. The unambiguous language of Section 523(a)(8) states a discharge under Section 727 of Title 11 does not discharge an “individual debtor from any
debt”
(emphasis added) for an educational program described in its provision.
In re Wilcon,
As a whole, Section 523 specifically describes nine types of
debts
that are subject to nondischargeability — and all are described without reference to the debtor’s stаtus as it may relate to the debt. Among the types of debts specifically delineated are debts for fraud incurred while acting in a fiduciary capacity or for defalcation, em
Because the statutory language of Section 523(a)(8) is clear and unambiguous, the plain meaning rule applies and the inquiry ends, provided its application yields no absurd results and an alternative interpretation does not exist that would reasonably effect the purpose of the statute.
United States v. Ron Pair Enterprises, Inc.,
“[Releasing co-signers could likely ... affect the economic viability of the student lоan program. After all, the lenders seek the security of a non-student cosigner precisely because there is a commercial risk in looking only to the student for credit assurance.”
In re Pelkowski,
990 F.2d at *744. Clearly, such an application of the statute
must
exist if the integrity of student loan programs is to be preserved. This interpretation and application of the statute is further validated inasmuch as Congress did, in fact, contemplate and carve out an exception to the nondischargeability provision (also without any reference or distinction made to a debtor’s status as borrower) by allowing deserving debtors to except from discharge debt for student loans if the loans came due more than seven years before filing for relief or if the debtor can show that undue hardship will occur if the debt is not excepted from discharge. 11 U.S.C. § 523(a)(8)(A), (B);
In re Dull,
Beсause Section 523(a)(8) was originally drafted with reference to a type of debt as opposed to a type of debtor, it is evident it was intended to be broad in application. This intention is magnified when considering the many changes that have been made to expand the text since it was first enacted. The additional intent manifested by these extensions is to make it more difficult to discharge educational loans in bankruptcy.
In re Dull,
“[Tjhose who take advantage of the Federal government’s deliberately generous approach to granting educational loans (as wеll as other non-profit guarantying institutions), and later failed to repay them, should not be allowed to escape payment forever through bankruptcy.”
In re Martin,
CONCLUSION
Section 523(a)(8) was designed to protect the integrity of student loan programs by ensuring future funding for students seeking ways to finance higher education. This goal is accomplished through Section 523(a)(8) which excepts from discharge all types of educational debt as described in the provision. The one caveat to the statute permits deserving debtors to discharge student loan debt if the debt came due more than seven years before the petition was filed or if the debtor can show that excepting the debt from discharge would cause an undue hardship. Neither of those clearly delineated exceptions apply in this case.
This case does, however, present a non-student debtor liable for student loan debt by virtue of co-signing her former spouse’s student loan applications. A co-signer or co-maker is one who formally undertakes to discharge the duties of the maker of an instrument, especially a promissory note, in the event of the maker’s default. Debtor argues the nondisehargeability provision should not apply because of her non-student status and because no educational benefits were received. But using the plain meaning rule to interpret and apply the statute, the Court finds there is no ambiguity in the language of Section 523(a)(8) and there is no ambiguity in the fact that the statute is silent on the subject of the debtor’s status as co-maker of these educational loans. The statute clearly
For all of these reasons, the Court finds that Section 523(a)(8) applies to non-student debtors, and, therefore, the student loan debt in this case is determined nondis-chargeable. The Court shall enter an appropriate order.
Notes
. Debtor endorsed/co-signed two of her spouse’s "Supplemental Loans for Students” (SLS) applications and joined her spouse in completing two SLS Loan Credit Applications: the first application, signed August 25, 1988, was for a loan amount of $2,805 to be used for education expenses for the school period 8/88-5/89, and the second application, signed July 25, 1989, was for a loan amount of $4,000 to be used for the school period 8/89-5/90. (Plaintiff's Exhibits 1, 2; Defendant’s Exhibit A.)
. In
Pelkowski,
the bankruptcy court's decision to discharge a co-maker’s student loan liability was reversed by the district court, and the reversal was affirmed by the Third Circuit.
In re Pelkowski,
. The actual
Boylen
complaint was based on subparagraph (B) of Section 523(a)(8), the "undue hardship” provision that allows a debtor to discharge educational debt if excepting the debt from discharge would impose an undue hardship on the debtor or the debtor’s dependents. 11 U.S.C. § 523(a)(8)(B). The
Boylen
court did, in fact, find a condition of “undue hardship" and allowed the debt to be discharged.
In re Boylen,
In this case, the parties have agreed there is no "undue hardship” argument to be made.
. Determined to protect certain educational assistance programs, Congress initially enacted a nondischargeability provision as part of the Education Amendments of 1976 which created a new section, 20 U.S.C. § 439A, to the Higher Education Act of 1965. See Education Amendments of 1976, Pub.L. No. 94-482, § 127(a), 90 Stat. 2081, 2141 (1976). In 1978, this provision was repealed and replaced by a similar provision, 11 U.S.C. § 523(a)(8), as part of the Bankruptcy Reform Act of 1978. See Pub.L. No. 95-598, §§ 317, 402(a), (d), 92 Stat. 2549, 2682 (1978).
. PHEAA states the following changes have broadened the statute’s application:
• In 1979, the statute was changed to include all federal, state, and college financial aid programs, then in effect, with the following language:
“(8) for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution of higher education, ....’’
11 U.S.C. § 523(a)(8) (1979).
• In 1984, the limiting phrase "of higher education” was deleted, which, PHEAA asserts, covers educational loans to students and their families made under programs "funded in whole or in part” by nonprofit institutions.
• In 1990, Congress amended the provisions of Chapter 13 to prevent student loans from being discharged in any proceeding under that chapter commenced on or after November 5, 1990. Pub.L. 101-746, § 3621, 104 Stat. 4964-65 (1990).
• In 1990, the statute was changed to make it more difficult to obtain a student loan discharge by requiring that the debt be due more than seven years before the date the bankruptcy petition was first filed as opposed to a previous five-year requirement. 11 U.S.C. § 523(a)(8) (1990).
• In 1990, more sources of educational debt were specifically included as nondischargeable. Now, excepted from discharge is any debt:
"(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, ... or for an obligation to repay funds received as an education benefit, scholarship оr stipend....”
11 U.S.C. § 523(a)(8) (1990).
.Debtor distinguishes any apparent consistency between these two decisions by noting that In re Boylen was decided by Bankruptcy Judge Harold F. White, one of eight bankruptcy courts in the Northern District of Ohio, whereas In re Dull was decided by Bankruptcy Judge William J. O’Neill, a different bankruptcy court from this same district.
. Debtor states the following cases involve loans made directly to parents as sole makers, not as co-signers:
In re Varma,
. "Under the Bankruptcy Act, educational loans were dischargeable resulting in millions of dollars in federally guaranteed loans defaulted upon annually.”
In re Shipman,
.The House Education and Labor Committee proposed the amendment, Section 439(a)(A), as part of the Education Amendments of 1976. Pub.L. No. 89-329, § 439A, as added by Education Amendments of 1976, Pub.L. No. 94-482, § 127(a), 90 Stat. 2141 (1976) (repealed by Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 317, 92 Stat. 2678 (1978)).
. Section 523(a)(8) originated as an amendment offered by Representative Ertel of Pennsylvania — an amendment that quickly passed in the House.
See
124 Cong.Rec. 1791, 1798 (1978). There was no debate in the Senate concerning the dischargeability of student loans, and the provision was passed without any material change.
See
124 Cong.Rec. 33,992, 33,-998 (1978). In essence, the only discussion regarding the purpose of Section 523(a)(8) is found in the statements of the sponsors.
See generally In re Hammarstrom,
. As originally enacted, 11 U.S.C. § 523(a)(8) excepted from general discharge any debt:
(8) to a governmental unit, or a nonprofit institution of higher education, for an education loan, unless—
(A) such loan first became due before five years before the date of the filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents.
11 U.S.C. § 523(a)(8) (1978).
. See supra note 5 and accompanying text.
. Statistics show the goal of preserving student loan programs has been an increasingly difficult challenge through the years: from 1983 to 1989, the volume of government-subsidized student loans grew by 83%, yet the default rate increased 350% during this same time period. By mid-1991, the student default rate was estimated at almost 12%, or about $2 billion, and at that time, the 1992 estimate was set at $3 billion. Epstein, Nickles & White, Bankruptcy: Practitioner Treatise Series, Vol. 2, § 7-33 n. 2, at 394 (West 1992).
. In summary, the following courts support an all-inclusive approach to the application of Section 523(a)(8):
• Pelkowski v. Ohio Student Loan Commission,153 B.R. 29 (W.D.Pa.1992).
• In re Wilcon,143 B.R. 4 (D.Mass.1992).
• In re Webb,151 B.R. 804 (Bankr.N.D.Ohio 1992).
• In re Dull,144 B.R. 370 (Bankr.N.D.Ohio 1992).
• In re Martin,119 B.R. 259 (Bankr.E.D.Okla.1990).
• In re Hudak,113 B.R. 923 (Bankr.W.D.Pa.1990).
• In re Taylor,95 B.R. 550 (Bankr.E.D.Tenn.1989).
• In re Hammarstrom,95 B.R. 160 (Bankr.N.D.Cal.1989).
• Matter of Selmonosky,93 B.R. 785 (Bankr.N.D.Ga.1988).
• Matter of Barth,86 B.R. 146 (Bankr.W.D.Wis.1988).
• In re Feenstra,51 B.R. 107 (Bankr.W.D.N.Y.1985).
In summary, the following courts conclude Section 523(a)(8) is intended to apply to student debtors only:
• In re Kirkish,144 B.R. 367 (Bankr.W.D.Mich.1992).
• In re Pelkowski,135 B.R. 254 (Bankr.W.D.Pa.1992).
• In re Behr,80 B.R. 124 (Bankr.N.D.Iowa 1987).
• In re Meier,85 B.R. 805 (Bankr.W.D.Wis.1986).
• In re Zobel,80 B.R. 950 (Bankr.N.D.Iowa 1986).
• In re Bawden,55 B.R. 459 (Bankr.M.D.Ala.1985).
• In re Washington,41 B.R. 211 (Bankr.E.D.Va.1984).
• In re Boylen,29 B.R. 924 (Bankr.N.D.Ohio 1983).
. See supra note 14 for a summary of courts finding Section 523(a)(8) was intended to apply solely to student debtors.
. The Higher Education Act of 1965 was amended in 1980 to include the PLUS loan program which made student loans directly to parents as primary obligors. 20 U.S.C. § 1078-2. Thus, the purpose of the PLUS loan program was to “provide parents with the liquidity to pay their reasonable share" of a child’s higher education.
In re Hudak,