                                                                                                                           Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-28-1995

Pennsylvania Higher Education Assistance Agency
v. Faish
Precedential or Non-Precedential:

Docket 95-7178




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT



                             No. 95-7178


                   IN RE:    MARJORIE JO FAISH,

                                           Debtor

         PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY

                                 v.

                       MARJORIE JO FAISH,

                                           Appellant


         On Appeal from the United States District Court
             for the Middle District of Pennsylvania
                      D.C. No. 94-cv-01353


         Submitted Pursuant to Third Circuit LAR 34.1(a)
                        October 19, 1995
                 BEFORE: SCIRICA, COWEN and ROTH
                          Circuit Judges

                   (Filed    November 28, l995)


Marjorie Jo Faish
4237-D Williamsburg Drive
Harrisburg, PA 17109

          Appellant Pro Se

K. Kevin Murphy
Pennsylvania Higher Education
 Assistance Agency
1200 North 7th Street
Harrisburg, PA 17102

          Counsel for Appellee
          Pennsylvania Higher Education
           Assistance Agency



                                 1
                                         OPINION

COWEN, Circuit Judge.



       In this case we must decide whether appellant Marjorie Jo

Faish is entitled to have her student-loan obligation discharged

in a Chapter 7 bankruptcy proceeding.                         If Faish can establish

that repayment of her student-loan debt would result in "undue

hardship" under § 523(a)(8)(B) of the Bankruptcy Code, she is

entitled     to    have    her    entire     debt       discharged.           11    U.S.C.    §

523(a)(8)(B).

       The      Bankruptcy       Court       for        the     Middle     District          of

Pennsylvania, citing equitable considerations, held that Faish

need     repay     only    $15,000.00,         less      than     half    of       her    loan

obligation.         On    appeal,      the     District        Court    for     the      Middle

District of Pennsylvania, applying a modified version of the

"undue hardship" test set forth in In re Johnson, 5 Bankr. Ct.
Dec. 532 (Bankr. E.D. Pa. 1979), reversed the bankruptcy court.

The    district      court      held    that     because       Faish     had       failed    to

establish        that     the    repayment         of    her     entire        student-loan

obligation        would    impose      "undue      hardship,"      no     discharge         was

appropriate here.

       We must also decide what legal standard bankruptcy courts

within    the     Third    Circuit      will     now     apply    when    they      consider

whether the facts presented give rise to "undue hardship," as

that term is to be construed under § 523(a)(8)(B).                            This area of

the law is presently in a state of considerable confusion, with


                                             2
bankruptcy courts within our Circuit applying a broad range of

standards.1
For                                  the                                          reasons

stated herein, we adopt the standard for "undue hardship" set

forth by the Court of Appeals for the Second Circuit in Brunner

v.                New               York                     State                Higher

Education       Services   Corp.,   831        F.2d    395   (2d     Cir.   1987)    (per

curiam).       Pursuant to this standard, although different from the

one applied by the district court below, we will affirm the

district court's order that Faish's student-loan debt must be

deemed nondischargeable in its entirety.
                                           I.

       Marjorie    Jo   Faish   obtained        a     Master's     Degree    in    Public

Health    and    Community   Health    Services         Administration        from    the

University of Pittsburgh in 1989.               To help defer the costs of her

education, Faish obtained $31,879.31 in guaranteed student loans

from     the     Pennsylvania    Higher         Education        Assistance        Agency

("PHEAA").



1
      The  Bankruptcy   Court   for  the   Western  District   of
Pennsylvania's recitation of the following bankruptcy court
decisions that have developed separate tests "to determine
whether the facts of a case constitute undue hardship" is
indicative of the current uncertainty.    See In re Correll, 105
B.R. 302, 305 (Bankr. W.D. Pa. 1989) (citing Brunner v. New York
State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987) (per
curiam); In re Conner, 89 B.R. 744 (Bankr. N.D. Ill. 1988); In
re Bryant, 72 B.R. 913 (Bankr. E.D. Pa. 1987); In re Craig, 64
B.R. 854 (W.D. Pa. 1986); In re Johnson, 5 Bankr. Ct. Dec. 532
(Bankr. E.D. Pa. 1979)).




                                           3
Under the terms of the loan agreements, Faish was required to

commence payments on her student-loan obligation on October 1,

1991.

       On

September 27, 1993, Faish filed a Chapter 7 bankruptcy petition

with     the        Bankruptcy          Court       for       the      Middle       District     of

Pennsylvania.             On     the    same    day,         Faish   filed     a    complaint    to

determine the dischargeability of her student loan debt to PHEAA.

A   trial      on    the       issue     of    dischargeability              was    conducted    on

December 22, 1993.

       On   July        12,      1994,        the   bankruptcy          court      rendered     its

decision, making the following factual findings.                                     See   In re

Faish, No. 93-01686, slip op. at 2-3 (Bankr. M.D. Pa. July 12,

1994).          Faish      has    a     job     working        for     the    Commonwealth       of

Pennsylvania         in    the     Department           of    Public    Welfare,       Bureau    of

Financial Operations, as a budget analyst.                                 She earns a yearly

gross salary of approximately $27,000.00.                            Faish does not own an

automobile and commutes to and from work by bus.                                    She has been

unsuccessful in her pursuit of a higher-paying job.

        Faish is thirty-years-old, unmarried and has an eleven-year-

old son.        Faish does not receive any child support payments from

the father of her child.                  She is concerned about the quality of

the neighborhood and school district that she lives in and is now

saving money for an automobile and a new apartment in a better

area.

        Faish    suffers         from    Crohn's        disease,       a     chronic   condition

affecting the bowel.              She also has back problems.                      The bankruptcy


                                                    4
court found, however, that although Faish's health problems are

"significant," they "are not interfering with her ability to

work." Id. at 5.

     Faish's    original    principal     debt   to   PHEAA    amounted    to

$31,879.31.    From November 13, 1991, through June 2, 1993, Faish

repaid $4,629.92 of her loan obligation.           As of September 1993,

Faish owed PHEAA $32,989.33.        Id. at 2.

        After setting forth these factual findings, the bankruptcy

court observed that "[o]ur district court has adopted the test

for undue hardship set forth in In re Johnson . . . . The Johnson

test divides the undue hardship inquiry test into three prongs:

a mechanical test, a good faith test, and a policy test."            Id. at

4. Applying the first prong of the Johnson test, the bankruptcy

court concluded that "Faish has failed to establish a lack of a

financial    ability   to   repay   for   the    foreseeable    future    and

therefore fails the mechanical prong of the Johnson test."                Id.

at 5.

     Although the Johnson court expressly held that if a student-

loan debtor fails to satisfy the mechanical test, "discharge of

the student loan must be denied," Johnson, 5 Bankr. Ct. Dec. at
544, the bankruptcy court below went on to apply Johnson's good

faith and policy tests.     As to the Johnson "good faith" test, the

bankruptcy court found that Faish had "established a sufficient

degree of good faith."        Faish, No. 93-01686, slip op. at 6.

However, Faish failed the "policy test" because "avoidance of the

obligation was a significant consideration in the filing."               Id.




                                     5
        Even though Faish had failed the Johnson "undue hardship"

test, the bankruptcy court went outside the Johnson framework and

considered what it deemed to be equitable considerations.                             The

court     cited          a     bankruptcy     court       decision    from     another

jurisdiction, Woyame v. Career Education & Management (In re

Woyame), 161 B.R. 198 (Bankr. N.D. Ohio 1993), as authority for

the proposition that bankruptcy courts have "some latitude in the

amount        of   the       nondischargeability      determination     even        where

individual prongs of the Johnson test are not met on their face."

Faish, No. 93-01686, slip op. at 7.

        The    bankruptcy        court    concluded       that   "[b]ased    upon    the

equities involved, Faish will be given partial relief."                        Id. at

8.2   The court observed that it was "especially influenced . . .

by Faish's need to support a young dependent, and her desire to

accumulate some savings in order to provide a better life for

him."     Id. at 7-8.           Accordingly, the bankruptcy court held that

"$15,000.00 of Faish's student loan debt will be deemed to be

nondischargeable, and the remainder of the obligation, including
2
    The bankruptcy court                 reached   this    conclusion   despite       its
earlier findings that

        Faish's current employment and income are good, as are her
        future employment and income prospects. Although a payment
        to PHEAA of nearly $300.00 impacts significantly upon
        Faish's disposable income, it does not place her or her son
        below the subsistence level. Indeed, Faish has managed to
        incorporate a savings component into her expenses, which is
        rare   in  my   experience   among  debtors   applying   for
        dischargeability based upon undue hardship.    Additionally,
        Faish's degree qualifies her for promotion and/or more
        favorable employment.

In re Faish, No. 93-01686, slip op. at 5 (Bankr. M.D. Pa. July
12, 1994).


                                             6
accrued and future interest, will be deemed to be dischargeable."

Id. at 8.

      On February 21, 1995, the District Court for the Middle

District of Pennsylvania issued a memorandum opinion reversing

the bankruptcy court.            The district court expressly rejected the

bankruptcy    court's      assumption       that     it    was   bound       by    Johnson.

Faish, No. 94-1353, slip op. at 4 n.2 (M.D. Pa. Feb. 21, 1995).

The   district    court     noted,       however,    that    while      it    "would not

rigidly    confine      itself     to    Johnson's    tripartite        analysis,"        it

would abide by Johnson's "general framework."                    Id. at 4.

      The district court observed that it was "the bankruptcy

judge's    step   beyond Johnson           which    has    given   rise       to    PHEAA's

appeal."     Id.     at    6.      The    district    court      then    reviewed         the

propriety of the bankruptcy judge's consideration of equitable

factors not contemplated by Johnson's three-pronged inquiry.                              The

court   stated     in     dictum    that    "the     bankruptcy       court        must    be

prepared to move beyond Johnson to the extent that the Johnson

analysis    fails    to    capture       scenarios        requiring     some       form    of

student debt relief to alleviate undue hardship."                             Id. at 7.

However, "the circumstances necessary to justify discharge must

be unusual, and the hardship faced in the event of full repayment

must be substantial."             Id. Citing Faish's favorable employment
prospects, the court concluded that "the continued viability of

governmentally guaranteed student loans is simply incompatible

with discharging student debt on the instant facts."                         Id. at 7-8.

Accordingly, the district court ordered that "Faish's student




                                            7
debt must be deemed nondischargeable in its entirety."                 Id. at 8.

This appeal followed.
                                          II.

         We have jurisdiction under 28 U.S.C. § 158(d).               Our review

of the district court's interpretation of the Bankruptcy Code is

plenary.     Leeper v. Pennsylvania Higher Educ. Assistance Agency,

49 F.3d 98, 100 (3d Cir. 1995);                In re Pelkowski, 990 F.2d 737,

739 (3d Cir. 1993).         The debtor has the burden of demonstrating

undue    hardship.      Woodcock    v.    Chemical     Bank,   NYSHESC   (In    re

Woodcock),    45     F.3d   363,   367    (10th    Cir.),    cert.   denied,    64

U.S.L.W. 3241 (U.S. 1995);          In re Roberson, 999 F.2d 1132, 1137

(7th Cir. 1993).
                                        III.

        Section   523(a)(8)(B)     of    the    Bankruptcy   Code    provides   as

follows:
     (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--
     . . .
     (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
received 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)(B) (emphasis added).




                                         8
     Section 523(a)(8)(B) was passed as part of the Bankruptcy

Reform Act of 1978.     As one commentator has explained, the "undue

hardship" exception of § 523(a)(8)(B)
     is difficult to apply because the drafters of the Bankruptcy
     Code did not define undue hardship. The drafters said that
     bankruptcy courts must decide undue hardship on a case-by-
     case basis, considering all of a debtor's circumstances.
     Looking for guidance in the undue hardship cases, the
     bankruptcy courts have shaped facts and circumstances tests
     of undue hardship by relying on the legislative history of
     section 523(a)(8).


Kurt Wiese, Note, Discharging Student Loans In Bankruptcy:               The
Bankruptcy Court Tests of "Undue Hardship," 26 Ariz. L. Rev. 445,

447 (1984) (hereinafter Wiese, Undue Hardship).

     Examining the Congressional Record in order to discern the

legislative purpose behind the enactment of § 523(a)(8)(B), we

observed in In re Pelkowski that "the debate in the main focused

on the twin goals of rescuing the student loan program from

fiscal doom and preventing abuse of the bankruptcy process by

undeserving debtors."        Pelkowski, 990 F.2d at 743.          Thus, the

Pelkowski court expressed agreement with the conclusion of the
Court of Appeals for the Sixth Circuit that "Congress enacted 11

U.S.C. § 523(a)(8) in an effort to prevent abuses in and protect

the solvency of educational loan programs."            Id.   (quoting In re

Merchant, 958 F.2d 738, 742 (6th Cir. 1992)).

        The Pelkowski court held that "[t]he Congressional intent to

eliminate debtor abuse of the educational loan program would

apply both to single makers of loan notes and to co-makers,

whether students or their parents or other co-signers, as all may

abuse     the   bankruptcy   system       or   take   advantage   of   legal


                                      9
loopholes." Pelkowski, 990 F.2d at 744.              The court concluded that

"Congress has revealed an intent to limit the dischargeability of

educational loan debt, and we can construe the provision no more

narrowly than the language and the legislative history allow."

Id. at 745.         See Darrell Dunham & Ronald A. Buch, Educational

Debts Under the Bankruptcy Code, 22 Mem. St. L. Rev. 679, 702

(1992) (hereinafter Dunham & Buch, Educational Debts) ("Congress

clearly intended that most educational debt still due within

seven years of graduation should be nondischargeable.").
                                          IV.

                                          A.

       Before we address the merits of Faish's petition, we must

decide which of the several "undue hardship" tests should be

applied in the present matter.             As one commentator has explained,

"[b]ankruptcy courts use a wide variety of tests to determine

whether the debtor has demonstrated undue hardship.                    While these

tests have received varying degrees of acceptance, no particular

test     authoritatively       guides     or    governs    the     undue    hardship

determination."        Thad Collins, Note, Forging a Middle Ground:

Revision of Student Loan Debts in Bankruptcy as an Impetus to

Amend 11 U.S.C. § 523(a)(8), 75 Iowa L. Rev. 733, 744 (1990).

Due    to   this   lack   of   a   "unified     approach   to    undue     hardship,

litigants are in the difficult position of not knowing which

standard     will    govern     their     case.      Consequently,         effective

presentation of evidence on undue hardship is made difficult

unless      the    jurisdiction     has    definitively      and     unequivocally




                                          10
adopted one test and a consistent set of determinative factors."

Id. at 747.    It is to this task that we now turn.

      The three most prominent tests applied to determine whether

the   "undue   hardship"     exception       of   §   523(a)(8)(B)       should   be

invoked are the Johnson test, the Bryant test and the Brunner

test.    The Johnson and Bryant tests have been described as "the

two   most   prominent    tests"    bankruptcy        courts     have   applied   to

decide   whether    the   "undue    hardship"         exception     should    apply.

Dunham & Buch, Educational Debts, supra, at 695.                        The Brunner

test has been adopted by a majority of the Courts of Appeals that

have specifically addressed the issue of what single standard

should be applied to determine whether "undue hardship" exists

under 11 U.S.C. § 523(a)(8)(B).              See Brunner, 831 F.2d at 395

(setting forth the Brunner test);             In re Roberson, 999 F.2d 1132

(7th Cir. 1993) (adopting the Brunner test);                     see also Cheesman

v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d

356   (6th   Cir.   1994),      cert.   denied,       115   S.    Ct.   731   (1995)

(applying the Brunner test).            We will now discuss in detail the

content and respective merits of these three "undue hardship"

standards.
                           1.    The Johnson Test

      The tripartite Johnson test was set forth by the Bankruptcy

Court for the Eastern District of Pennsylvania in In re Johnson,

5 Bankr. Ct. Dec. at 532. The Johnson test provides as follows:
     In determining whether the undue hardship exception entitles
     a specific debtor to discharge of his student loan, a court
     should rely on three tests:
          (1) Mechanical Test:    The court must ask:    Will the
     debtor's   future  financial   resources  for   the  longest


                                        11
       foreseeable period of time allowed for repayment of the
       loan, be sufficient to support the debtor and his dependents
       at a subsistence or poverty standard of living, as well as
       to fund repayment of the student loan? If the question is
       answered affirmatively, discharge of the student loan must
       be denied. If answered negatively, then the court must apply
       the good faith test:
            (2) Good Faith Test:       Here, the court asks two
       questions:

             (a) Was the debtor negligent or irresponsible in his
       efforts to minimize expenses, maximize resources, or secure
       employment?
             (b) If "yes," then would lack of such negligence or
       irresponsibility have altered the answer to the mechanical
       test?

            If the answer to the first part of the good faith test
       is no, then the debtor should be discharged of the
       obligation to repay his student loan.       However, if the
       answers to both parts of the good faith test are "yes," then
       a presumption against discharge is established--which may be
       rebutted by a negative answer to the third and final test.
            (3) . . . Policy Test: The court must ask: Do the
       circumstances--i.e., the amount and percentage of total
       indebtedness of the student loan and the employment
       prospects of the petitioner indicate:

            (a) That the dominant purpose of the bankruptcy
       petition was to discharge the student debt, or
            (b)   That  the   debtor   has  definitely benefitted
       financially from the education which the loan helped to
       finance?

            If the answer to both parts of this question is a firm
       "no," then the debtor should be discharged from his student
       loan obligation. If the court answers "yes" to either part
       of the question, then discharge should be denied.


Id. at 544.

       Johnson's    tripartite         analysis   appears        to   be   both

unnecessarily complicated and unduly cumbersome.             When Johnson is

applied correctly, however, most petitions will be denied after

the mechanical test is applied.           Thus, in this sense, the Johnson

test   is   in   accord   with   our    recognition   of   the    Congressional


                                        12
objectives of preventing abuse of the bankruptcy process and

protecting the financial integrity of the student loan program.

Pelkowski, 990 F.2d at 743-44.                Similarly, both the good faith

and policy tests provide additional protection against abuse of

the   student   loan    program.        The    Johnson      test,    by   its   terms,

contains no provision that would permit bankruptcy courts to

negate a finding of nondischargeability based upon an assessment

of other "equitable considerations" that may be deemed to be

relevant.
                             2.   The Bryant Test

      The Bryant test was set forth by the Bankruptcy Court for

the Eastern District of Pennsylvania eight years after Johnson

was decided.     In re Bryant, 72 B.R. 913 (Bankr. E.D. Pa. 1987).

The   Bryant    court   criticized       the    three-part      Johnson     test    as

"unfortunately complicated" and promulgated an alternative test

for   "undue    hardship."        Id.   at     915   n.2.      The    Bryant     court

explained its standard in the following terms:
     The test which we propose strives to place the element of
     objectivity into the process of decision-making in this
     area. We propose, as a starting position, to analyze the
     income and resources of the debtor and his dependents in
     relation to federal poverty guidelines established by the
     United States Bureau of the Census and determine the
     dischargeability of the student loan obligation on the basis
     of whether the debtor's income is substantially over the
     amounts set forth in those guidelines or not.     If not, a
     discharge will result only if the debtor can establish
     "unique" and "extraordinary" circumstances which should
     nevertheless render the debt dischargeable. If the debtor's
     income is below or close to the guideline, the lender can
     prevail only by establishing that circumstances exist which
     render these guidelines unrealistic, such as the debtor's
     failure to maximize his resources or clear prospects of the
     debtor for future income increases.    We feel that such a
     test will decrease, if not eliminate the resort to the


                                        13
     unbridled subjectivity which seems to pervade many of the
     decisions in this area.


Id. at 915.    Elaborating upon its new "undue hardship" exception

standard, the bankruptcy court observed that "[w]e find ourselves

in disagreement with those courts which have denied discharges of

student loans on the basis of whether any given expenses are

justified,    as     these      represent      subjective      value       judgments

concerning which we consider ourselves no better able to gauge

than, generally, debtors themselves."              Id. at 918.

     We    expressly   reject     and     depart    from    this    reasoning      and

analysis.      The   Bryant      test's    refusal    (or    at    least    extreme

reluctance) to question whether certain expenses debtors have

incurred can be justified seems inconsistent with Congress' dual

legislative    goals       of   "eliminat[ing]        debtor       abuse    of     the

educational loan program" and "preserv[ing] the fiscal integrity

of the student loan program."             Pelkowski, 990 F.2d at 744.              The

Bryant test does not adequately account for the fact that one of

the most common reasons student-loan debtors find themselves in
bankruptcy court is that their "subjective value judgments" are

often (but not always) indicative of a spendthrift philosophy

which a bankruptcy court should be competent to consider before

discharging their student loans.

     The Bryant court also expressed disagreement with the first

inquiry of the Johnson "policy test," which asks if "the dominant

purpose of the bankruptcy petition was to discharge the student

debt."     Johnson, 5 Bankr. Ct. Dec. at 544.                  The Bryant court

declared    that   since     "avoiding       the   consequences      of    debts    is


                                        14
normally the reason for filing for bankruptcy . . . the fact that

the Debtor seeks to discharge almost exclusively student loan

obligations . . . should be irrelevant."            Bryant, 72 B.R. at 915

n.2.     We disagree. The purpose behind the debtor's bankruptcy

petition is not irrelevant in this context because one of the

reasons that Congress enacted § 523(a)(8)(B) was in response to

"reports    of   students    discharging    student       loan   debts     after

graduation and subsequently accepting high-paying jobs."                  Wiese,

Undue Hardship, supra, at 446. See Brunner, 831 F.2d at 396

(Congress intended "to make the discharge of student loans more

difficult than that of other nonexcepted debt.").                   For these

reasons, we decline to adopt the Bryant test.
                            3.   The Brunner Test

       As the Court of Appeals for the Second Circuit has observed,

before   Brunner   was   decided    there   was   "very    little   appellate

authority on the definition of `undue hardship' in the context of

11 U.S.C. § 523(a)(8)(B)."         Brunner, 831 F.2d at 396.             Relying

upon the reasoning of the district court below,3 the Brunner

court set forth the following three-part test for the "undue

hardship" exception:
     (1)    that the debtor cannot maintain, based on current
     income and expenses, a "minimal" standard of living for
     herself and her dependents if forced to repay the loans;
     (2) that additional circumstances exist indicating that this
     state of affairs is likely to persist for a significant
     portion of the repayment period for student loans; and (3)
     that the debtor has made good faith efforts to repay the
     loans.


3
   See 46 B.R. 752 (Bankr. S.D.N.Y. 1985), aff'd, 831 F.2d at
395.


                                      15
Id.

       The   Court    of    Appeals      for      the   Seventh        Circuit    formally

adopted the Brunner test in In re Roberson, 999 F.2d at 1132.                             In

Roberson, both the bankruptcy court and the district court below

had    applied      the    three-part      Johnson        test.         After    expressly

rejecting     the    Johnson      test     and    giving    the    Brunner       test     its

imprimatur, the Seventh Circuit described how the Brunner test

should properly be applied.

       The   Roberson      court    observed       that     "[t]he      first    prong     of

Brunner requires an examination of the debtor's current financial

condition to see if payment of the loans would cause his standard

of living to fall below that minimally necessary."                            Id. at 1135.

The court admonished that the other prongs of the Brunner test

should not be examined if the first prong has not been satisfied.

Id.

       The   second       prong     of   the      Brunner     test      requires       "that

additional     circumstances         exist       indicating      that    this     state   of

affairs is likely to persist for a significant portion of the

repayment period of the student loans."                       Brunner, 831 F.2d at

396.    The Roberson court observed that this requirement "properly
recognizes the potential continuing benefit of an education, and

imputes to the meaning of `undue hardship' a requirement that the

debtor show his dire financial condition is likely to exist for a

significant portion of the repayment period."                      Roberson, 999 F.2d

at 1135.

       The   third    prong    of    the     Brunner      test    is    the     good   faith

inquiry. The Roberson court noted that the question of good faith


                                             16
should only be reached if the debtor has satisfied the first two

elements. See id. at 1136.            The good faith inquiry is to be

guided by the understanding that "undue hardship encompasses a

notion that the debtor may not willfully or negligently cause his

own default, but rather his condition must result from `factors

beyond his reasonable control.'"             Id. (quoting Comm'n on the

Bankruptcy Laws of the United States, Report, [H.R. Doc. No. 137,

93d Congress, 1st Sess., Pt. II], at 140 n.16).

      The Roberson court rejected the second prong of the Johnson

"policy     test,"    which   considers      "whether       the   debtor     `has

definitely benefitted financially from the education which the

loan helped to finance.'"         Id. at 1136 (quoting Johnson, 5 Bankr.

Ct. Dec. at 544).       The court observed that "[s]uch an inquiry

conflicts with the basic concept of government-backed student

loans."     Roberson, 999 F.2d at 1136.

      The   Seventh   Circuit     cited    the   Southern    District   of      New

York's statement in Brunner that federal student loan programs

were not designed to "turn[] the government into an insurer of

educational value."      Id. (quoting Brunner, 46 B.R. 752, 756 n.3

(S.D.N.Y. 1985)).        Students who benefit from guaranteed loan

programs normally "would not be eligible to receive any financing

or   only   financing   at    a   higher    rate   of   interest   .    .   .    ."

Roberson, 999 F.2d at 1136.         Since "[t]he decision of whether or

not to borrow for a college education lies with the individual,"

it is "the student, not the taxpayers, [that] must accept the

consequences of the decision to borrow."            Id. at 1137.




                                      17
     We agree with the Seventh Circuit's analysis and we offer

another criticism of the Johnson test.            Johnson is needlessly

verbose and multifaceted.     Its multiple tests and the subsidiary

questions required to be answered thereunder do not provide the

required clear statement of what the law is.         For these reasons,

we decline to adopt the Johnson "undue hardship" test as the law

of this Circuit.
                                   B.

        Of the three tests that we have considered, Brunner is the

most consistent with the scheme that Congress established in

1978.    The   Brunner standard   meets   the   practical   needs   of   the

debtor by not requiring that he or she live in abject poverty for

up to seven years before a student loan may be discharged.               On

the other hand, the Brunner standard safeguards the financial

integrity of the student loan program by not permitting debtors

who have obtained the substantial benefits of an education funded

by taxpayer dollars to dismiss their obligation merely because

repayment of the borrowed funds would require some major personal

and financial sacrifices.

     The Brunner test is the most logical and workable of the
established tests.     Analysis under Brunner is not hampered either

by the flawed Johnson "policy test" or the unwarranted deference

with which the Bryant test reviews the personal spending habits

of student-loan debtors.      Brunner's concise formulation is both

easier to follow and to apply than Johnson's.         We therefore hold

that the Brunner "undue hardship" test must now be applied by
bankruptcy courts within the Third Circuit.


                                   18
                                                V.

      Brunner now       provides     the    definitive,       exclusive         authority

that bankruptcy courts must utilize to determine whether the

"undue hardship" exception applies.                   Student-loan debtors have

the burden of establishing each element of the Brunner test.                           All

three elements must be satisfied individually before a discharge

can be granted.         If one of the requirements of the Brunner test

is not met, the bankruptcy court's inquiry must end there, with a

finding of no dischargeability.                  See id. at 1135.                Equitable

concerns or other extraneous factors not contemplated by the

Brunner framework may not be imported into the court's analysis

to   support    a   finding     of   dischargeability.            See   Norwest        Bank

Worthington v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 969

(1988)   ("whatever          equitable   powers      remain      in   the       bankruptcy

courts   can     only    be     exercised       within     the    confines        of   the

Bankruptcy Code").

      Applying the factual findings of the bankruptcy court below,

we now must determine whether Faish has satisfied her burden of

establishing that repayment of her student-loan obligation would

impose an "undue hardship" upon her.4                  Applying the first prong

of the Brunner test, we must determine whether Faish "cannot
maintain,      based    on    current    income      and   expenses,        a   `minimal'

standard of living for herself and her dependents if forced to

repay the loans."        Brunner, 831 F.2d at 396.


4
   We conclude that sufficient facts appear in the record to
enable us to perform the Brunner analysis. Remand, therefore, is
unnecessary.


                                           19
       The bankruptcy court found that Faish was employed by the

Commonwealth      of   Pennsylvania,        Department       of   Public    Welfare,

Bureau of Financial Operations, as a budget analyst at the time

of trial. She earned a gross yearly salary of $27,000.00 in 1993.

The court found that "Faish's current employment and income were

good,"      and that while "a payment to PHEAA of nearly $300.00

[per month] impacts significantly upon Faish's disposable income,

it does not place her or her son below the subsistence level."

Faish, No. 93-01686, slip op. at 5.

       The first prong of the Brunner analysis requires more than a

showing of tight finances.             Faish has failed to establish through

evidence presented at trial that, based upon her current income

and expenses, she could not maintain a minimal standard of living

if forced to repay her loans.              Therefore, we conclude that Faish

has failed to satisfy the first element of the Brunner test.

Accordingly, we need not decide whether she would have satisfied

the second and third elements of our new standard.                      We therefore

hold     that     Faish's         entire        student-loan       obligation        is

nondischargeable.

       Although   Faish     has    a    steady       job,   she   argues   that   her

inability to find a job in her chosen field militates in favor of

discharge. In response to a similar claim, the Southern District

of New York in Brunner denied a discharge in bankruptcy to a
student-loan debtor who was far less fortunate than Faish.                        The

student-loan debtor in Brunner entered college in 1972.                           She

received   a    "Bachelor's       degree        in   Psychology    in   1979   and   a

Master's degree in social work in 1982."                     Brunner, 46 B.R. at


                                           20
756.    Appellee Marie Brunner "testified that she had sent out

`over a hundred' resumes in search of employment in her chosen

field."    Id. at 757. Nonetheless, upon graduation Brunner was

unable to find work and at the time of her hearing she had been

supporting herself on public assistance for a period of four

months.    Id.   In the decade prior to her bankruptcy hearing,

Brunner's "greatest annual income was $9,000."    Id. at 756.

       Despite Brunner's inability to find work, the district court

held that she had failed to satisfy the first prong of the

Brunner test, which the court itself had just articulated.      The

district court observed that Brunner
     appears to be a woman who is unlikely to find a job in her
     chosen field of work in the near future. However, she is an
     apparently healthy, presumably intelligent, and well-
     educated woman. Although she claimed to be unable to find
     any other type of work, the evidence presented at the
     hearing is too thin to support a finding that her chances of
     finding any work at all are slim . . . . She has no
     dependents or any other extraordinary burdens which would
     impair her finding other work, or, once it is found, make it
     unlikely that she can both support herself and pay off her
     student loans.

            In short, appellee at most proved that she is
       currently--or was at the time of the hearing--unable both to
       meet her minimal expenses and pay off her loans. This alone
       cannot support a finding that the failure to discharge her
       loans will impose undue hardship.      (citations omitted).
       Nothing in the record supports a finding that it is likely
       that her current inability to find any work will extend for
       a significant part of the repayment period of the loan or
       that she has "a total incapacity now and in the future to
       pay [her] debts for reasons not within [her] control."
       (quoting In re Rappaport, 16 B.R. 615, 617 (Bankr. D.N.J.
       1981)).


Id. at 757-58.




                                 21
       Today we adopt the reasoning of the Second Circuit.                          A

comparison of the facts in Brunner and Faish is telling.                          The

financial straits of the bankruptcy petitioner in Brunner appear

to   have    been    far    more    serious    than   any    short-term,         belt-

tightening that may be required of Faish in order to repay her

student-loan obligation.

       Faish does not satisfy the standard that we set forth today.

Moreover, full nondischargeability is especially appropriate here

because, in essence, Faish was asking the bankruptcy court to

allow a discharge of her student-loan obligation so that she

could devote the money (which could otherwise have been earmarked

for student loan payments) to savings for the purchase of a new

car and to settle into a new apartment.               Cf. Matthews v. Pineo,

19 F.3d 121, 124 (3d Cir.), cert. denied, 115 S. Ct. 82 (1994)

(NHSC scholarship recipient's "current income and . . . expenses

should [not] be regarded as unalterable.                    Instead, the proper

inquiry is whether it would be `unconscionable' to require [the

debtor] to take any available steps to earn more income or to

reduce her expenses.").
                                   VI.   CONCLUSION

       For   the    foregoing      reasons,   we   adopt    the   Brunner   "undue

hardship" standard to determine whether student-loan debt can be

discharged pursuant to 11 U.S.C. § 523(a)(8)(B).                  We further hold

that Faish has failed to satisfy her burden to establish undue

hardship under the Brunner standard and that her entire student-

loan    obligation     is   nondischargeable.          The    judgment      of    the

district court will be affirmed.


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