               United States Bankruptcy Appellate Panel
                             FOR THE EIGHTH CIRCUIT

                                         ______

                                     No. 98-6095NE
                                         ______

In re:                                      *
                                            *
Donna Mae Andresen,                         *
                                            *
         Debtor.                            *
                                            *
Donna Mae Andresen,                         *
                                            *
         Appellee,                          *   Appeal from the United States
                                            *   Bankruptcy Court for the
               v.                           *   District of Nebraska
                                            *
Nebraska Student Loan Program, Inc.,        *
                                            *
         Appellant.                         *

                                         ______

                               Submitted: March 3, 1999
                                Filed: March 30, 1999
                                       ______

Before KRESSEL, SCHERMER, and DREHER, Bankruptcy Judges.
                                ______

KRESSEL, Bankruptcy Judge.

      The Nebraska Student Loan Program, Inc., appeals from the September 2, 1998, and
October 16, 1998, orders of the bankruptcy court1 holding that two of the debtor’s student



         1
        The Honorable John C. Minahan, Jr., United States Bankruptcy Judge for the
District of Nebraska.
loans were discharged in her Chapter 7 case under the undue hardship provision of §
523(a)(8) of the Bankruptcy Code.

       We review the bankruptcy court’s factual findings for clear error and its conclusions
of law de novo. Johnson v. Border State Bank (In re Johnson), ___ B.R. ___, 1999 WL
89958 (8th Cir. BAP Feb. 24, 1999); Eilbert v. Pelican (In re Eilbert), 162 F.3d 523, 525 (8th
Cir. 1998). A determination of undue hardship is a factual determination, and is reversible
only if we find clear error.2

       Because we conclude that the bankruptcy court correctly interpreted § 523(a)(8) as
applying to each student loan individually and not to an aggregate obligation of cumulative
student loan debt, and because the bankruptcy court’s determination that the debtor would
experience undue hardship if two of her student loans were excepted from discharge is not
clearly erroneous, we affirm.

                                  BACKGROUND
       The debtor, Donna Mae Andresen, obtained three student loans,3 one each year in
1986, 1987, and 1988, while attending school to become a licensed practical nurse. The
loans were each guaranteed by NSLP, which is still the holder of the three loans. The loans
are not consolidated.




       2
         But see Cheesman v. Tennessee Student Assistance Corp. (In re Cheesman), 25
F.3d 356, 359 (6th Cir. 1994) (determination that excepting student loans from discharge
will impose undue hardship is a question of law subject to de novo review; factual
findings underlying the determination are reviewed for clear error). We do not agree with
this narrow distinction. While defining undue hardship is a question of law, we think that
the determination of whether excepting a student loan from discharge will result in undue
hardship for the debtor and the debtor’s dependents is a question of fact.
       3
           The original dates and principal balances of the loans are:
               March 31, 1986        - $2,500.00
               February 10, 1987 - $2,625.00
               April 7, 1988         - $1,177.00

                                               2
     Andresen filed her Chapter 7 bankruptcy petition on January 7, 1991. In 1993,
         sustained a severe back injury with a disability rating of 43% for workers’
compensation
commenced a nationwide job search. Eventually she found an employer willing to



      On May 1, 1996, Andresen filed this adversary proceeding seeking determination of
   dischargeability of her three student loans pursuant to the undue hardship provisions of
§
the court entered an order finding that Andresen had satisfied the requirements of § 523(a)(8)
    a hardship discharge of two of her three student loans, and found that she could pay the
third loan without undue hardship.

      NSLP contends that the bankruptcy court erred when it found that excepting
            student loans from discharge would impose undue hardship on her and her
dependents,
Andresen’s student loan debt. For the reasons set forth below, we affirm the judgment of the



                                       DISCUSSION
                                      Partial Discharge

               A discharge under section 727 ... of this title does not discharge an
                  debtor from any debt — for an educational benefit overpayment or
       loan
       program funded in whole or in part by a governmental unit or nonprofit
                   or for any obligation to repay funds received as an educational
       benefit,
       under this paragraph will impose an undue hardship on the debtor and the




       4
           The debtor does not appeal this part of the court’s judgment.
See 11 U.S.C. § 523(a)(8).5

        Across jurisdictions there is wide disparity among treatments of student loans under
§ 523(a)(8). For the past two decades, a split has developed regarding whether a court may
partially discharge a debtor’s student loan or whether the courts are restricted to all-or-
nothing dischargeability.

       The courts practicing revision of student loans, granting partial discharges, and
fashioning other case-specific equitable relief have found authority to do so implicit in §
523(a)(8) due to its policy objectives, and alternatively in the discretionary equitable powers
reserved to the bankruptcy court by § 105(a). See Thad Collins, Note, Forging Middle
Ground: Revision of Student Loan Debts in Bankruptcy as an Impetus to Amend 11 U.S.C.
S 523(A)(8), 75 Iowa L. Rev. 733, 757-61 (1990).

        Critics of the partial discharge theories, however, note the “well-accepted principle
that if Congress is able to specify something in the statute but does not, then its silence
controls.” Id. at 758, citing NLRB v. Bildisco, 465 U.S. 513, 522-23 (1984). Accordingly,
if Congress had intended revision or partial discharge to be options for the court to consider
under § 523(a)(8), then Congress could have expressly enumerated those options or included
broader language in order to reveal that policy objective and enable the bankruptcy courts
to effectuate it.6


       5
          The noted version of the statute became effective October 7, 1998. The earlier
version contained a provision controlling the dischargeability of student loans the due
date of which arose more than seven years prior to filing the bankruptcy petition. That
provision was repealed and undue hardship is now the only basis for discharge of student
loans. However, the prior version of the statute would not produce a different result in
this case. Andresen filed her Chapter 7 petition less than seven years after her student
loans first became due.
       6
           See, e.g., 11 U.S.C. § 523(a)(5) (includes the language “but not to the extent
that...” in order to qualify the exceptions to the nondischargeability of debts to the
debtor’s children, spouse or former spouses, and other matrimonial related debts. Such
language presumably vests the bankruptcy court with the latitude and duty to find which
parts of a debt under this section are discharged and not, as opposed to limiting the

                                              4
       The legislative history clearly identifies the policies behind the exception to discharge
for student loans. Congress excepted student loans from discharge in order to close what it
deemed a loophole in the student loan program. Id. at 734; see also Johnson v. Missouri
Baptist College (In re Johnson), 218 B.R. 449, 451-54 (8th Cir. BAP 1998). This so-called
loophole permitted graduates to escape their student loan obligations by filing bankruptcy
on the eve of a lucrative career. Id. The exception to discharge was created to “rescu[e] the
student loan program from insolvency, and [to] prevent[] abuse of the bankruptcy process
by undeserving student debtors.” See Raymond L. Woodcock, Burden of Proof, Undue
Hardship, and Other Arguments for the Student Debtor Under 11 U.S.C. § 523(A)(8)(B),
J.C. & U.L. 377, 381-84 (1998).

        Nevertheless, as clear as the legislative history is, it suffers a lack of scope. While
it identifies the legislative purpose of excepting student loans from discharge, the legislative
history offers little to define the nature of the exception (undue hardship) to the exception
(nondischargeability). That Congress wanted to save the student loan programs and bar the
undeserving student borrower from abusing the bankruptcy process does not directly identify
how Congress intended the discharge to be granted in cases of undue hardship.7 The


outcome of the determination to all-or-nothing. Section 523(a)(7) also includes “to the
extent” language to preclude the all-or-nothing discharge and presumably require the
court to make specific findings as to the extent to which the debt is nondischargeable.
       7
          In this regard, it is worth noting the significance of § 523(a)(8) prior to its most
recent amendment: the original section allowed student loans to be discharged without
demonstrating undue hardship as long as a period of 5 years (subsequently amended to 7
years and most recently completely eliminated) following the first due date of the loans
had expired. That the original statute contemplated a point at which a debtor could
discharge student loans completely and without a showing a undue hardship may explain
the apparent all-or-nothing approach to the undue hardship discharge exception.
Congress simply wasn’t contemplating any situation in which a loan would require
revision by a bankruptcy court because either a loan would be fully dischargeable before
the five (or seven) years on the basis of undue hardship, or it would be fully
dischargeable in any event upon expiration of the applicable number of years. Under the
original statute, therefore, a debtor would be unlikely to seek relief in bankruptcy prior to
the expiration of the applicable number of years since repayment on a student loan
became due, unless the debtor’s undue hardship made it imperative.

                                               5
legislative purposes do not illustrate the legislative position on the propriety of partial
discharge and other revisions of student loans in undue hardship cases under § 523(a)(8).

        Nevertheless, some courts have found that revising student loans, partially discharging
them, or deferring payments by maintaining or extending the automatic stay, are proper
applications of the undue hardship exception to the nondischargeability of student loans
because such manipulation upholds the policies behind nondischargeability generally and
attributes significance to the fresh start policy at the same time.8 These courts find that
partial discharge of student loans protects the solvency of the student loan programs and
deters undeserving debtors while protecting the honest but unfortunate debtor better than the
all-or-nothing approach which can lead to harsh results, either for the creditor or the debtor
depending on the whether the outcome is all or nothing. See, e.g., Georgia Higher Educ.
Assistance Found. v. Bowen (In re Bowen), 37 B.R. 171, 173 (Bankr. M.D. Fla. 1984)
(acknowledges that the literal language of the statute does not create the leeway to exercise
equitable powers, but concludes that it is nevertheless appropriate and within the policy of
the statute to hold the debt nondischargeable but restructure repayment because the either/or
results are unnecessarily harsh).

        Other courts granting partial discharge and other partial relief under § 523(a)(8) rely
on the equitable powers of § 105(a), which provides, in relevant part, “The court may issue
any order, process, or judgment that is necessary or appropriate to carry out the provisions
of this title. No provision of this title...shall be construed to preclude the court from, sua
sponte, taking any action or making any determination necessary or appropriate...to prevent
an abuse of process.” See, e.g., Connor v. Illinois State Scholarship Commission (In re
Connor), 89 B.R. 744, 750 (Bankr. N.D. Ill. 1988) (Section 105(a) cited as authority without
elaboration).




       8
         But see Craig A. Gargotta, Column, Affairs of State, Congress Amends §
523(A)(8) to Elimibate Seven-Year Discharge Provisions for Student Loans, 17-NOV
Am. Bankr. Inst. J. 8 (1998) (Congress now views undue hardship not as a debtor
protection, but rather as a creditor protection, and consequently fresh start is no longer
the issue, but whether the non-payment of the student loans violates public policy).

                                              6
        However, § 105(a) has been found by some courts to be restricted to exercising
equitable powers only within the enumerations of the Code. See Johnson v. First Nat’l Bank
of Montevideo, 719 F.2d 270, 273 (8th Cir. 1983) (bankruptcy court erred when it stayed a
state statutory period of redemption pursuant to § 105(a); bankruptcy court’s broad equitable
powers may only be exercised in a manner which is consistent with the provisions of the
Code). Indeed, the Supreme Court has also said as much. See Norwest Bank Worthington
v. Ahlers, 485 U.S. 197, 206 (1988) (whatever equitable powers remain in the bankruptcy
courts must and can only be exercised within the confines of the Bankruptcy Code).

        Accordingly, the question arises whether § 105(a) provides authority for a bankruptcy
court to grant an undue hardship discharge under § 523(a)(8) in any manner less than full
discharge when the language of § 523(a)(8) does not itself include any particular limiting or
broadening language. On its face, the statute asks only whether or not excepting the loan at
issue from discharge will impose undue hardship upon the debtor or the debtor’s dependents.
The telling word in the section is unless, which therefore casts the determination as: if
excepting the student loan from discharge will impose undue hardship, then the debt is
discharged.

       In spite of the unstable foundation upon which rests the authority, if any, to revise
student loans or partially discharge student loan debt, courts continue to do so on the basis
of implicit statutory policy or § 105(a) discretion because the literal interpretation and its
sometimes harsh results seem at odds with the legislative intentions for § 523(a)(8) and with
the purposes of the Code overall.9 These courts, at least, have apparently deemed fairness

       9
          Interestingly, there are so many cases in which bankruptcy courts have granted
partial discharge under § 523(a)(8) that some commentators and even some courts in
cases addressing the exception to discharge for nonsupport divorce debts under §
523(a)(15) have recognized a partial discharge theory operating in § 523(a)(8) and
applied it to § 523(a)(15) by analogy. See Stephen Joseph, How Courts Have Interpreted
the Phrases “Ability to Pay” and “Outweighs the Detrimental Consequences” Under 11
U.S.C. § 523(a)(15)(A) and (B) of the Bankruptcy Code in Cases Involving Non-
Dischargeable Divorce Obligations-Part I, 103 Com. L. J. 67, 78 (1998); Richard H.W.
Maloy, Using Bankruptcy Court to Modify Domestic Relations Decrees: Problems
Created by § 523(A)(15), 31 Fam. L. Q. 433, 453 (1997); Comisky v. Comisky (In re
Comisky), 183 B.R. 883, 884 (Bankr. N.D. Cal. 1995); but see McGinnis v. McGinnis (In

                                              7
principles a concern supreme to arbitrary or unpredictable results and consistent with, or
within the confines of, express provisions of the Code. See Collins at 761 (whether or not
revision or partial discharge of student loans pursuant to § 523(a)(8) constitutes intolerable
judicial lawmaking depends on whether the practice furthers or corrupts the legislative
intent).

        For example, in Tennessee Student Assistance Corp. v Hornsby (In re Hornsby), 144
F.3d 433, 439-40 (6th Cir. 1998), the Sixth Circuit Court of Appeals recently held that the
bankruptcy court should not have discharged the debtors’ entire student loans because,
pursuant to § 105(a), “[i]n a student-loan discharge case where undue hardship does not
exist, but where facts and circumstances require intervention in the financial burden on the
debtor, an all-or-nothing treatment thwarts the purpose of the Bankruptcy Act.” The court
concluded that bankruptcy courts have the equitable power to: (1) partially discharge student
loans, either by discharging an arbitrary amount of the principal, interest accrued, or attorney
fees; (2) institute a repayment schedule (presumably modifying the repayment terms of the
loan); (3) defer repayment; (4) acknowledge that the debtor may re-open the proceedings to
revisit the question of a hardship discharge; or (5) fashion any appropriate remedy. Id. at
440. The court noted that “[i]mplicit in this practice of revising student loan debts is the
notion that a rigid, all-or-nothing interpretation does not sufficiently or effectively address
the array of facts and circumstances that appear before the courts.” Id. at 439, n.9, citing
Collins at 736.

       A number of courts finding partial discharge and other modifications of student loans
appropriate rely on Heckathorn v. United States Dept. of Educ. (In re Heckathorn), 199 B.R.
188, 194-95 (Bankr. N.D. Okla. 1996), which stayed accrual of interest for three years and
stayed collection of the debtor’s student loans for five years. See, e.g., Rivers v. United
Student Aid Funds, Inc. (In re Rivers), 213 B.R. 616, 618-19 (Bankr. S.D. Ga. 1997); Jones



re McGinnis), 194 B.R. 917, 921 (Bankr. N.D. Ala. 1996) (acknowledges the analogy
between § 523(a)(8) and (a)(15) but appears to rely exclusively on legislative history and
statutory interpretation of (a)(15), regardless of the noted analogy to (a)(8), to hold that
the court has discretion to modify the debt as opposed to being restricted to an all-or-
nothing determination of dischargeability.

                                               8
v. Catholic University of America (In re Jones), 1997 WL 52188 (Bankr. D. D.C. 1997).
The bankruptcy court in Heckathorn reasoned that because the bankruptcy discharge is an
injunction, the provisions “which effectively shape the injunction, [such as the exceptions
to discharge under § 523,] should be read as an expression of the equitable nature, function,
and (it necessarily follows) behavior of the injunctive remedy.” Heckathorn, 199 B.R. at
194.

        Construing the exceptions to discharge “in light of equity” requires the bankruptcy
court to recognize that the relief that Congress afforded the debtor under § 523(a)(8) centers
around undue hardship, which is necessarily a “matter of degree.” Id. at 195. “Financial
hardship is not all-or-nothing, but is more or less.” Id. The Heckathorn court further relied
on the premise that partial discharge or other revision of student loan debt accomplishes both
legislative policy objectives, fresh start and maximum repayment of student loans, instead
of “[i]nsisting on complete discharge or complete repayment [and] unnecessarily sacrific[ing]
one policy to the other.” Id. Finally, the Heckathorn court relied on the general canon of
statutory interpretation that a court should not interpret a statute plainly if so doing would
lead to an absurd result, “meaning a result which furthers no purpose, i.e. is arbitrary or
fortuitous.” Id.

       The theory of partial discharge and its progeny of assorted other equitable responses
by courts facing debtors for whom a whole discharge seems overly generous (usually due to
the debtor’s potential for increased future earnings) appears to have begun with the
bankruptcy court’s opinion in Littell v. State of Oregon Bd. of Higher Educ. (In re Littell),
6 B.R. 85, 89 (Bankr. D. Or. 1980). The court in Littell offered no authority for its
position, but merely held that “[i]nstead of the all-or-nothing approach [prevailing in nearly
every case to date], the courts should consider whether only part of the debt should be
nondischargeable and what monthly payment the debtor could afford.” Id. The court
ordered a partial discharge of the debtor’s loans by first reducing the payments and then,
interestingly, calculating the number of payments to be made so that payments would
terminate at the end of the five year nondischargeable period. Id.

       Since the Littell opinion in 1980, the number of courts granting partial discharges and
other equitable relief under § 523(a)(8) has increased considerably. See, e.g., Wetzel v. New

                                              9
York Higher Educ. Services Corp. (In re Wetzel), 213 B.R. 220, 226-27 (Bankr. N.D. N.Y.
1996) (bankruptcy court has discretion to consider the extent to which student loans are
nondischargeable); Oderkirk v. Northwest Educ. Loan Ass’n., Fin. Assistance, Inc. (In re
Oderkirk), 1995 WL 241338 (Bankr. D. Idaho 1995) (bankruptcy courts have the equitable
power to either restructure or partially discharge student loans); Dennehy v. Sallie Mae (In
re Dennehy), 201 B.R. 1008, 1012-13 (Bankr. N.D. Fla. 1996) (debtor’s student loans
nondischargeable, but collection and accrual of interest deferred for two years); Cheesman
v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d 356, 360-61 (6th Cir. 1994)
(debtor’s student loans nondischargeable, but court’s order stayed for 18 months); Roberson
v. Illinois Student Assistance Comm’n. (In re Roberson), 999 F.2d 1132, 1138 (7th Cir. 1993)
(affirmed bankruptcy court’s order deferring student loans for two years, without comment
on the source of authority); Woyame v. Career Educ. & Management (In re Woyame), 161
B.R. 198, 203 (Bankr. N.D. Ohio 1993) (partial discharge of student loans); Griffin v.
Eduserv (In re Griffin), 197 B.R. 144, 147 (Bankr. E.D. Okla. 1996) (bankruptcy court has
the authority to modify the repayment terms and/or the amount owed) (citations omitted);
Silliman v. Nebraska Higher Educ. Loan Program (In re Silliman), 144 B.R. 748, 752 (Bankr.
N.D. Ohio 1992) (partial discharge of student loan debt); Bakkum v. Great Lakes Higher
Educ. Corp. (In re Bakkum), 139 B.R. 680, 683-84 (Bankr. N.D. Ohio 1992) (bankruptcy
court has the discretion to excuse any portion of the debtor’s student loan obligation which
would create an undue hardship).

       Contrariwise, other courts have found that there is absolutely no authority for the
bankruptcy court to do anything but make the undue hardship determination and accordingly
find the student loan at issue either discharged or excepted from discharge. In Hawkins v.
Buena Vista College (In re Hawkins), 187 B.R. 294, 300-01 (Bankr. N.D. Iowa 1995), the
bankruptcy court held that it did not have the power to rewrite loan repayment terms. “The
court’s authority under § 523 is to determine dischargeability. This is an all-or-nothing
proposition.” Id. at 300. The court noted that the Littell opinion, upon which many
subsequent opinions have expressly relied, justified its decision on equitable grounds but
offered no analysis of the lack of express authority in § 523 to do other than decide
dischargeability. Id. at 300-01.




                                            10
       In construing § 523(a)(8) and concluding that it does not authorize the courts to
fashion partial discharges, the Hawkins court noted that “Congress has not given bankruptcy
courts the authority to rewrite student loans,” and that “Congress could have provided that
student loans will be dischargeable ‘to the extent’ excepting such debt will impose undue
hardship upon a debtor and her dependents,” especially in light of the fact that “Congress
used that phrase numerous times elsewhere in the Bankruptcy Code, including three other
subdivisions of the dischargeability statute, 11 U.S.C. §§ 523(a)(2), 523(a)(5), and
523(a)(7).” Id. at 301. The court noted the well-known canon of statutory construction that
“Congress’ failure to include language is presumed intentional where it has used the language
elsewhere in the same statute.” Id.; citing Bildisco, 465 U.S. at 522-23. Regarding the
court’s statutory equitable powers, the Hawkins court stated that “the bankruptcy court’s
power under § 105 is not a limitless authorization to do whatever seems equitable,” and
noted the rule that “[t]he court may not use § 105 to effect a result in conflict with other
sections of the Bankruptcy Code.” Hawkins, 187 B.R. at 301, citing United States v. Energy
Resources Co., Inc., 495 U.S. 545, 549-50 (1990).

        In Skaggs v. Great Lakes Higher Educ. Corp. (In re Skaggs), 196 B.R. 865, 866-67
(Bankr. W.D. Okla. 1996), the court held that its “authority to determine dischargeability of
student loans is limited strictly to a determination of whether a discharge of the entire debt
is required.” Id. at 867 (emphasis added). The Skaggs court relied on the well-known canon
of statutory interpretation that “[a] court must confine the scope of its inquiry to the language
of a particular statute unless it is ambiguous on its face.” Id. at 866, citing United States v.
Ron Pair Enter., Inc. 489 U.S. 235, 241 (1989). The court concluded § 523(a)(8)(B) is clear
and unambiguous, and determined that its literal application is not “demonstrably at odds”
with the legislative scheme. Skaggs, 196 B.R. at 866, citing Griffin v. Oceanic Contractors,
458 U.S. 564, 571 (1982).

        Finally, the court in Skaggs explained that § 523(a)(8) is so clearly unambiguous on
its face that the limit on the court’s power “to act only on the entire student loan” is self-
evident: “‘Debt’ is defined in section 101(12) of the Bankruptcy Code as ‘liability on a
claim.’ Plainly understood, ‘liability on a claim’ encompasses the entire liability, not merely
some portion of the debt or merely selected terms of repayment. Congress might have used


                                               11
language to authorize the discharge of partial liability or the modifications of conditions of
liability but did not.” Skaggs, 196 B.R. at 866.

       Interestingly, few opinions, including Skaggs which included consideration of the
statutory definition of debt and analysis of the meaning of liability on a claim, address the
premise that a debtor’s liability on a claim for repayment of a student loan made, or of
another educational debt or obligation (or overpayment), as provided by § 523(a)(8), speaks
to one or to each loan. Many of the cases on both sides of the issue completely overlook the
apparently express wording of the statute which mandates an undue hardship evaluation for
each individual educational loan obligation. The cases deal with the debt in aggregate,
perhaps misled merely because multiple loans are often held by one lender, servicer or
guarantor which may subtly manage to blend multiple liabilities on actually different claims
into one single debt.

        Other courts have distinguished among a single debtor’s multiple loans but
nevertheless held that the all-or-nothing rule requires the hardship discharge to operate on
either all or none of the debtors loans. In Young v. PHEAA (In re Young), 225 B.R. 312,
317-18 (Bankr. E.D. Pa. 1998), the bankruptcy court held that declaring some of the debtor’s
eight loans dischargeable but leaving nondischargeable those the court deemed her able to
pay would constitute “an exercise of § 105(a) powers in contradistinction to the language of
§ 523(a)(8)(B).” Id. at 318. The court suggested that the only permissible way to
accomplish a partial discharge in this manner would be for the lender to voluntarily withdraw
its objections to the discharge of certain loans.

        In Brown v. SallieMae Serv. Corp. (In re Brown), 227 B.R. 540, 547-48 (Bankr. S.D.
Cal. 1998), the debtor had several different loans, owing to at least two different lenders, for
which he was seeking an undue hardship discharge. The court deemed the case “a classic
situation in which [it] should order that a portion of the student loans be repaid by Plaintiffs
[because a] partial discharge approach is the best means of protecting the interests of all
involved.” Id. at 547. The court indicated that it would have preferred to require the debtor
to devote all of his disposable income to repayment of the loans for five years thereby
“provid[ing] some return to the lenders yet reliev[ing] Plaintiffs of what would otherwise be
a life-long financial burden.” Id.

                                              12
        However, the court deferred to the Ninth Circuit BAP’s holding that the plain
language of § 523(a)(8) precluded partial discharge of a student loan, and accordingly
discharged all of the debtor’s student loans. See United Student Aid Funds, Inc. v. Taylor
(In re Taylor), 223 B.R. 747, 753 (9th Cir. BAP 1998). Unfortunately, the Brown court did
not read § 523(a)(8) plainly enough to distinguish a requirement that an individual undue
hardship determination for each of the debtor’s student loans could warrant the conclusion
that some but not all of a debtor’s student loans were properly discharged. It could certainly
have done so and still followed the all-or-nothing rule as set forth by the BAP in Taylor.

       In Taylor, the Ninth Circuit BAP did indeed hold that the plain language of §
523(a)(8) does not authorize a partial discharge of student loans. Taylor, 223 B.R. at 753.
The BAP agreed with the reasoning and the statutory construction applied by the courts in
the Skaggs and Hawkins opinions, and disagreed with the courts that have deemed the statute
ambiguous and/or applied the equitable powers of § 105(a) in order to find partial discharges
and fashion other revisions of student loans. Id. at 752-54.

       However, the BAP in Taylor did not hold that individual treatment of each of a
debtor’s student loans under § 523(a)(8) constituted partial discharge. The BAP did not
define partial discharge with that much particularity. The BAP simply did not address
whether the statute’s undue hardship exception, to the otherwise general exception to
discharge of student loans, is to be applied all-or-nothing as to the debtor’s “debt for an
educational... overpayment or loan,” as opposed to a debtor’s summed debts or aggregate
debt for educational overpayments or loans. 11 U.S.C. § 523(a)(8).

       The debtor in Taylor originally borrowed educational funds from different lenders,
and some of the loans were later consolidated. Taylor at 749. Accordingly, the BAP in
Taylor also overlooked the significance, if any, of the effect of consolidation on some or all
of a debtor’s student loans. The court did not answer whether or not, for purposes of
applying the all-or-nothing undue hardship rule, consolidation transforms a debtor’s original
several loans into a single loan. Its treatment of the debtor’s student loans nevertheless, was
comprehensive in that the all of all-or-nothing included all of the debtor’s student loans,
consolidated and not, as opposed to all (dollars) of each loan.


                                              13
       The Eighth Circuit Court of Appeals has not specifically decided the issue of partial
dischargeability. However, in Pagnac v. Minnesota Dep’t. of Revenue (In re Pagnac), 228
B.R. 219, 223 (8th Cir. BAP 1998), we found the argument that the debtor’s tax obligation
“be partially discharged based on some hardship theory” unavailing because courts that have
permitted partial discharge of certain debts “exist only in the context of sections 523(a)(8)
and 523(a)(15), governing discharge of student loans and divorce obligations, where hardship
exists as a statutorily created issue[,]” whereas “[s]ection 507(a)(8), governing priority of
certain taxes, has no hardship provision.” Id. While we acknowledged the application of a
theory of partial discharge by some courts under §§ 523(a)(8) and (a)(15), we did not, in
Pagnac, endorse the theory.

        The cases finding partial discharges and crafting a myriad of equitable relief varieties
illustrate the unpredictability and lack of uniformity of outcomes resulting from courts not
following an all-or-nothing rule. While the courts endorsing theories of a broad grant of
discretion or an implicit prevailing policy objective rely on principles of fairness and lack
of better way to properly address the multitude of factors unique to each student loan
bankruptcy case, the pervasive lack of certainty and the diversity of results may in fact
produce an entirely different set of inequities. It seems reasonably possible that Congress
in fact wrote § 523(a)(8) as plainly as it did because the all-or-nothing approach actually
strikes a superior equilibrium by sorting student loan cases along a bright-line and containing
judicial discretion within the confines of defining and determining undue hardship, rather
than vesting the bankruptcy court with the authority, much less the duty, to interfere as much
as the judicial tinkering demonstrated by the cases practicing partial discharge and other
revision of student loans.

       In this case, we hold that the bankruptcy court did not grant Andresen a “partial
discharge” of her student loan debt, at least not in the sense contemplated by NSLP or
contained by the term of art definition of partial discharge as it has developed over the last
twenty years. The language of § 523(a)(8) expressly refers to a student loan, an
overpayment, or any obligation. The words provided in the section are clearly singular. The




                                              14
Code does not refer to a debtor’s sum of student loans, aggregate student loan debt, or other
accumulated, consecutive, or consolidated loan obligations.10

       The bankruptcy court found that Andresen’s Chapter 7 discharge operated on two of
her three individual student loans by reason of the undue hardship provision of § 523(a)(8).
The court found that one of her student loans was excepted from the discharge because
paying that loan would not cause undue hardship to her or her dependents.11 This is not a
case where a court found that the discharge operated to relieve part of a single loan, or part
of a sum of consolidated loans, by some pro rata, percentage or other truly partial measure.

       We hold that the bankruptcy court’s application of § 523(a)(8) to each of Andresen’s
educational loans separately was not only allowed, it was required.



       10
          At least one other court appreciates this distinction. See Hinkle v. Wheaton
College (In re Hinkle), 200 B.R. 690, 693 (Bankr. W.D. Wash. 1996) (bankruptcy court
cannot restructure loans, but there is no reason that it cannot treat each one separately for
the purpose of dischargeability). The Hinkle court stated that it found the language of
§ 523(a)(8) sparse but unambiguous, especially in light of Congress glaring omission of
“to the extent” wording, and it rejected § 105 powers as authority to restructure student
loans or grant partial discharges. Id. The court also limited its holding to loans that have
not been consolidated. Id.
       11
          But see Raimondo v. New York State Higher Educ. Serv. Corp. (In re
Raimondo), 183 B.R. 677, 679-81 (Bankr. W.D. N.Y. 1995). The court in Raimondo
expressly noted that § 523(a)(8) “requires that the Court consider the dischargeability of
each loan as a separate obligation,” and [n]othing in its text expressly authorizes the
division of a single claim ... into dischargeable and nondischargeable parts.” Id. at 680.
Nevertheless, the court found that “[n]o statute dictates a disparity of result as among
educational lenders. Rather equity demands an identical treatment for these similarly
situated creditors.” Id. The court held that § 523(a)(8) “permits the discharge, on a pro
rata basis, of only that portion” of the debt that exceeds what the debtor could pay
without hardship. Id. at 681. We respectfully disagree with the Raimondo court.
Creditor protection is accomplished by the exception to discharge; the exception to the
exception operating in circumstances of undue hardship is a debtor protection. The loan-
by-loan all-or-nothing application of hardship discharge effects the level of debtor-
creditor equilibrium that Congress intended when it drafted the unambiguous § 523(a)(8).

                                             15
        To determine whether § 523(a)(8) permits partial discharge is to determine whether
the statute permits a single student loan to be divided into discharged and excepted portions
due to the undue hardship that would otherwise be imposed upon the debtor and her
dependents if the whole single obligation were excepted. While it appears plain to us that
there is no authority in the Code or elsewhere for partial discharge or other revision of a
debtor’s individual educational loan obligations, that question is not before us and we
therefore decline to decide it.

                                     Undue Hardship
      Undue hardship is not defined in the Bankruptcy Code. The legislative history
demonstrates that Congress was concerned about abusive student debtors and protecting the
solvency student loan programs, but the history does not shed light on exactly what Congress
meant by the use of the term undue hardship. See Veryl Victoria Miles, Fairness,
Responsibility, and Efficiency in the Bankruptcy Discharge: Are the Commission’s
Recommendations Enough? 102 Dick. L. Rev. 795, 824-830 (1998).

       Primary arguments over enactment of § 523(a)(8) addressed the lack of empirical
evidence of student debtors in fact constituting a threat to the continued viability of student
loan programs and whether the exception to discharge was actually a collection device for
lenders not being aggressive enough with collection efforts. Id. Appreciation for the fact
that undue hardship would accordingly be “subject to disparate multi-factor approaches” has
occurred only with the benefit of hindsight. Id. at 828, citing Bankruptcy: The Next Twenty
Years, National Bankruptcy Review Commission, Final Report, ch. 5 at 52 (Oct. 20, 1997)
(dissent).

       Indeed, a number of tests for undue hardship have been developed over the last two
decades, each trying to accurately reflect and enforce the policies Congress intended by
enacting the exception to the exception, and yet each containing significant differences. See
Robert F. Salvin, Student Loans, Bankruptcy, and the Fresh Start Policy: Must Debtors be
Impoverished to Discharge Educational Loans? 71 Tul. L. Rev. 139, 170 (1996) (Undue
hardship is an empty vessel, susceptible to being filled with whatever policy objectives
courts deem appropriate).


                                              16
                                       The Brunner Test
       In its determination, the bankruptcy court relied on the test set forth by the Second
Circuit Court of Appeals in Brunner v. New York State Higher Educ. Serv. Corp. (In re
Brunner), 831 F.2d 395, 396 (2nd Cir. 1987). The court found that Andresen satisfied all
three elements of the Brunner undue hardship test: (1) she could not maintain, based on
current income and expenses, a minimal standard of living for herself and her dependents if
forced to repay the loans; (2) her current state of affairs was likely to persist for a significant
portion of the repayment period of the student loans; and (3) she had made a good faith effort
to repay the loans. Id.

      Many bankruptcy courts, including several in the Eighth Circuit, have followed the
Brunner test. See, e.g., United States Dep’t of Educ. v. Rose (In re Rose), 227 B.R. 518, 524
n.7 (Bankr. W.D. Mo. 1998) (citations omitted); Hawkins v. Buena Vista College (In re
Hawkins), 187 B.R. 294, 297-298 (Bankr. N.D. Iowa 1995); Zlotopolski v. Dressel (In re
Dressel), 212 B.R. 611, 615-616 (Bankr. E.D. Mo. 1997).

                                       The Johnson Test
        The Brunner test is a popular variation of what appears to be the first § 523(a)(8)
undue hardship test, articulated years earlier by the bankruptcy court for the Eastern District
of Pennsylvania, in Johnson v. Pennsylvania Higher Educ. Assistance Agency (In re
Johnson), 5 B.C.D. 532 (Bankr. E.D. Pa. 1979). The Johnson test considers:                1) a
mechanical analysis of the debtor’s past and probable future financial resources;       2) the
debtor’s good faith, including the debtor’s best efforts to repay the loan and minimize
expenses; and 3) a policy analysis of the debtor’s motives in filing, including whether the
debtor derived financial benefits from the education received by virtue of the loans. Id. If
the bankruptcy court finds against the debtor on any of the three tests, the inquiry ends and
the student loan is not dischargeable. Id. Some courts have adopted or modified the Johnson
test as preferable to Brunner. See, e.g., Cossette v. Higher Educ. Assistance Found. (In re
Cossette), 41 B.R. 689,691 (Bankr. D. Minn. 1984); North Dakota State Bd. of Higher
Educ. v. Frech (In re Frech), 62 B.R. 235, 240-41 (Bankr. D. Minn. 1986).



                                    The Bryant-Poverty Test

                                                17
        On the other hand, some courts have declined to follow Johnson or Brunner.
In 1987, the bankruptcy court in Bryant v. Pennsylvania Higher Educ. Assistance Agency
(In re Bryant), 72 B.R. 913, 916-17 (Bankr. E.D. Pa. 1987) noted its dissatisfaction with the
“unbridled subjectivity” at work in the good faith analysis element of undue hardship cases.
Id. at 915. The Bryant court therefore introduced the poverty test under which a debtor’s
student loans were presumptively nondischargeable if the debtor’s income exceeded the
Federal poverty guidelines, unless the debtor could prove extraordinary circumstances
meriting discharge in spite of a lack of poverty. Id. at 916-19.




                                  Miscellaneous Variations
       Other courts have added other levels of precision to certain factors of different tests,
perhaps clarifying an ambiguity within the test a jurisdiction applies but adding to the
confusion overall. For example, in 1993, the Seventh Circuit Court of Appeals held that the
Brunner analysis of future income potential requires certain and not temporary hopelessness
in order for a discharge to operate of a debtor’s student loans. See In re Roberson, 999 F.2d
1132, 1135 (7th Cir. 1993). The court also added that the Brunner good faith inquiry requires
applying the rule that if the debtor’s inability to repay his student loans is due to his own
negligence or irresponsibility in conducting his financial affairs, then discharge must be
denied. Id. at 1136.

        In 1995, the Third Circuit defined undue hardship as unconscionable hardship. See
PHEAA v. Faish (In re Faish), 72 F.3d 298, 303-05 (3d Cir. 1995). In Jones v. Catholic
University of America (In re Jones), 1997 WL 52188, 1 n.2 (Bankr. D. Dist. Col. 1997), the
court stated that it disagreed “with the Brunner test to the extent that it looks to the
‘repayment period of the loan’ to determine whether the debtor’s undue hardship situation
is likely to persist.” The court noted that § 523(a)(8) “speaks to the ‘debt’ and not to the
repayment period of the loan itself,” and that “[t]he real issue is whether the debt should be
discharged because there is no hope for the debtor to repay it in the future.” Id.

                               The Cheesman and Pena Tests


                                              18
        In 1997, the Ninth Circuit Bankruptcy Appellate Panel rejected Brunner in favor of
the test enunciated by the Sixth Circuit in Cheesman v. TSAC (In re Cheesman), 25 F.3d
356, 359 (6th Cir. 1994). See United Student Aid Funds, Inc. v. Pena (In re Pena), 207 B.R.
919, 922 (9th Cir. BAP 1997). It seems to us that the court in Cheesman applied the Brunner
test, but the Ninth Circuit BAP found a distinction arising from wording in Brunner, absent
from Cheesman, that “additional circumstances exist indicating that this state of [the debtor’s
financial] affairs is likely to persist for a significant portion of the payment period of the
student loans.” Pena, 207 B.R. at 922, citing Brunner, 831 F.2d at 396 (emphasis added).
“[R]igid adherence by the court to a particular test robs the court of the discretion envisioned
by Congress in drafting § 523(a)(8)(B). The Court finds that the more equitable approach
is to view each case in the totality of the circumstances involved.” Pena, 207 B.R. at 922.
(citations omitted).

       The Pena court also rejected Brunner based on its good faith test limitation, as
enunciated by the district court in that case, precluding the debtor from offering evidence that
the education for which the loans paid was of little or no use or benefit to the debtor. Id. at
923, citing Brunner, 46 B.R. 752, 755 n.3 (S.D.N.Y. 1985). Instead, the BAP in Pena held
that the test for undue hardship was flexible enough to properly consider the value of a
debtor’s education to the extent that doing so was part of determining the debtor’s future
earning ability. Pena, 207 B.R. at 923 (the debtor’s education had not materially helped him
improve his employment and his current financial situation was likely to continue).

                         The Rule in the Eighth Circuit: Andrews
       The Eighth Circuit Court of Appeals has not expressly adopted or rejected the
Brunner or any other test for undue hardship. However, we think the Eighth Circuit
expressed its preference for a totality of the circumstances test a long time ago in Andrews
v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702, 704 (8th Cir.
1981). Although Andrews was decided two years after Johnson, the Court did not mention
the Johnson test. Instead, the Court relied on recommendations to Congress by The
Commission on the Bankruptcy Laws of the United States when § 523(a)(8) was enacted,12

       12
         The Eighth Circuit relied on the Commission’s recommendation that student
loans “should not as a matter of policy be dischargeable before (the debtor) has

                                              19
and the opinions of the bankruptcy courts in In re Wegfehrt, 10 B.R. 826, 830 (Bankr. N. D.
Ohio 1981) (each student loan undue hardship case must be examined on the facts and
circumstances surrounding the particular bankruptcy, and the court must determine whether
there would be anything left from the debtor’s estimated future income to enable the debtor
to make some payment on his/her student loan without reducing what the debtor and his/her
dependents need to maintain a minimal standard of living. In re Bagley, 4 B.R. 248, 250-51
(Bankr. D. Ariz. 1980). See Andrews, 661 F.2d at 704.

       The Eighth Circuit’s opinion in Andrews resulted in a test for undue hardship under
§ 523(a)(8) that requires an analysis of (1) the debtor’s past, present, and reasonably reliable
future financial resources; (2) calculation of the debtor’s and his dependents’ reasonable
necessary living expenses; and (3) any other relevant facts and circumstances surrounding
that particular bankruptcy case. Id. The Eighth Circuit’s Andrews case, while not a finely
detailed test as those pronounced in Brunner or Frech, is the authority in this circuit on the
matter of undue hardship discharge under § 523(a)(8).

       Moreover, the Andrews test is less restrictive and less narrow, yet it maintains the
essential core considerations. For example, the Frech test asks whether and to what extent
the debtor received benefit from his or her education financed by the loans sought to be
discharged. We think that, absent unique circumstances, this inquiry would ordinarily be
irrelevant. On the other hand, it may speak to a debtor’s future earning capacity. The
Brunner test extends the issue of the debtor’s ability to repay to the term of repayment of the
loan. We think this limitation may not be appropriate in every case.



demonstrated that for any reason he (or she) is unable to earn sufficient income to
maintain himself (or herself) and his (or her) dependents and to repay the educational
debt.” Andrews, 661 F.2d at 704 (emphasis added). The Court also stated that, “[i]n
order to determine whether the nondischargeability of the student loan would impose an
‘undue hardship’ on the debtor, the Commission stated that: ... the rate and amount of
(the debtor’s) future resources should be estimated reasonably in terms of ability to
obtain, retain, and continue employment and the rate of pay that can be expected...The
total amount of income, its reliability, and the periodicity of its receipt should be
adequate to maintain the debtor and (the debtor’s) dependents, at a minimal standard of
living within their management capability, as well as to pay the educational debt.” Id.

                                              20
                              Totality of the Circumstances
       There are many courts applying a totality of the circumstances test for undue hardship
under § 523(a)(8).13 For example, in Law v. The Educ. Resource Inst., Inc. (In re Law), 159
B.R. 287, 292-293 (Bankr. D. S.D. 1993), the bankruptcy court for the district of South
Dakota rejected the Brunner test opting instead for a “case-by-case” and “fact-sensitive”
approach that considers a debtor’s good faith, financial resources, and necessary expenses
as well as any other circumstances. The court explained that a totality test “affords a
determination that contextually considers both the debtor’s situation and the policies
underlying § 523(a)(8)” and better “ensures an appropriate, equitable balance [between]
concern for cases involving extreme abuse and concern for the overall fresh start policy.”

       In Strauss v. Student Loan Office - Mercer University (In re Strauss), 216 B.R. 638,
641 (Bankr. N.D.Cal. 1998), the bankruptcy court rejected the Brunner and Cheesman tests.
The court found that the Ninth Circuit BAP in Pena had recognized the potential pitfalls of
an overly narrow test and endorsed the application of a totality of the circumstances test
when the particular situation of a given case contained issues that would not be properly
addressed by consideration under one of the more rigid approaches. Id. at 642. “[U]nder
these circumstances [before the court in Strauss], applying the three pronged Cheesman test
... would work a substantial injustice and be contrary to the policies of the Bankruptcy Code.
Instead, a ‘totality of the circumstances’ test should be applied.” Id.

       Finally, the bankruptcy court in Rose v. United States Dep’t of Educ (In re Rose), 227
B.R. 518, 524 (Bankr. W.D. Mo. 1998), recently noted the Eighth Circuit’s controlling
opinion in Andrews and characterized “the test as questioning whether the debtor’s future
resources would sufficiently provide for a ‘minimal standard of living’ and still leave
something to pay the educational debt.” Rose, 227 B.R. at 524. “The Eighth Circuit


       13
          See, e.g., Moorman v. Kentucky Higher Educ. Assistance Auth. (In re
Moorman) 44 B.R. 135, 137-38 (Bankr. W.D. Ky. 1984); D’Ettore v. Devry Inst. of
Tech. (In re D’Ettore), 106 B.R. 715, 718 (Bankr. M.D. Fla. 1989); Coleman v. Higher
Educ. Assistance Found. (In re Coleman), 98 B.R. 443, 451 (Bankr. S.D. Ind. 1989); Ford
v. Tennessee Student Assistance Corp. (In re Ford), 151 B.R. 135, 138-40 (Bankr. M.D.
Tenn. 1993); Evans v. Higher Educ. Assistance Found. (In re Evans), 131 B.R. 372, 375-
76 (Bankr. S.D. Ohio 1991);.

                                             21
ultimately approved an inquiry that considered the debtor’s present employment and
financial situation (including assets, expenses and earnings) along with the prospect for
future changes (either positively or negatively) in the debtor’s financial position.” Id.

       The test for undue hardship binding bankruptcy courts in the Eighth Circuit is that
held by the Court of Appeals in Andrews. We interpret Andrews to require a totality of the
circumstances inquiry with special attention to the debtor’s current and future financial
resources, the debtor’s necessary reasonable living expenses for the debtor and the debtor’s
dependents, and any other circumstances unique to the particular bankruptcy case.

        A careful review of the record in this case reveals that the bankruptcy court, although
it explicitly applied the Brunner test, did not err when it found that excepting two of
Andresen’s student loans from discharge would impose undue hardship on Andresen and her
dependents. The Brunner test and the Andrews test are similar, with the controlling Andrews
test simply allowing a broader consideration of the case and any factors specific to a given
debtor’s particular situation. We find that the bankruptcy court’s finding of undue hardship
is supported by the evidence under either test.

        We reject NSLP’s contention that Andresen did not prove that her financial situation
is unlikely to improve in the future. The bankruptcy court specifically found that due to her
disability, Andresen’s income will not likely increase “at any time in the future.” Moreover,
the bankruptcy court noted that although Andresen’s son would soon reach the age of
majority and no longer be her legal responsibility, the child support she receives for his care
will also be eliminated at that time.

        Finally, although NSLP argues that Andresen will have extra income in three years
when her second mortgage is paid off, the bankruptcy court noted that Andresen’s minor
daughter has medical problems the treatment of which results in extraordinary expenses from
time to time. This may indicate that although Andresen’s legal responsibility for that child
will terminate before the second mortgage is satisfied, she may nevertheless be required to
continue caring for the child, or face accrued medical bills, and without the benefit of the
child support she currently receives for that child.


                                              22
      The bankruptcy court made a careful analysis of the debtor’s situation. Without
second guessing the bankruptcy court, we cannot find that its factual findings are clearly
erroneous. Based on those findings, we agree that excepting the loans from discharge would
impose undue hardship on Andresen and her dependents.

                                    CONCLUSION
       Because the bankruptcy court did not allow a partial discharge of a student loan, we
need not address the issue of the permissibility under the Code of partial discharges of
student loans under § 523(a)(8).

       The court’s factual findings are not clearly erroneous but are supported by the record
and indicate that, under the Andrews totality of the circumstances test for undue hardship,
Andresen and her dependents would suffer undue hardship if two of her student loans were
excepted from discharge. Accordingly, we affirm the judgment of the bankruptcy court.



       A true copy.

              Attest:

                        CLERK, U.S. BANKRUPTCY APPELLATE
                        PANEL, EIGHTH CIRCUIT.




                                             23
