United States Bankruptcy Appellate Panel
             For the Eighth Circuit
         ___________________________

                 No. 16-6021
         ___________________________

                  In re: Sara J. Fern

                lllllllllllllllllllllDebtor

              ------------------------------

                      Sara J. Fern

        lllllllllllllllllllll Plaintiff - Appellee

                            v.

                 FedLoan Servicing

             lllllllllllllllllllll Defendant

           U.S. Department of Education

       lllllllllllllllllllll Defendant - Appellant

 Pennsylvania Higher Education Assistance Agency

             lllllllllllllllllllll Defendant
                     ____________

   Appeal from United States Bankruptcy Court
   for the Northern District of Iowa - Dubuque
                 ____________

            Submitted: January 6, 2017
             Filed: February 7, 2017
                  ____________
Before KRESSEL, FEDERMAN and SHODEEN, Bankruptcy Judges.

                                   ____________

SHODEEN, Bankruptcy Judge,

The Defendant, U.S. Department of Education, appeals from the Bankruptcy
Court’s1 determination that Fern’s student loans are dischargeable based upon undue
hardship pursuant to 11 U.S.C. § 523(a)(8). For the reasons that follow, we affirm.

                            STANDARD OF REVIEW

      The determination of undue hardship is a legal conclusion subject to de novo
review. Long v. Educ. Credit Mgmt. Corp. (In re Long), 322 F.3d 549, 553 (8th Cir.
2003). Subsidiary findings of fact on which the legal conclusions are based are
reviewed for clear error. Educ. Credit Mgmt. Corp. v. Jesperson, 571 F.3d 775, 779
(8th Cir. 2009). We may affirm on any basis supported by the record. Kaler v.
Charles (In re Charles), 474 B.R. 680, 687 (B.A.P. 8th Cir. 2012) (citing Stabler v.
Beyers (In re Stabler), 418 B.R. 764, 766 n. 2 (B.A.P. 8th Cir. 2009)).

                                   DISCUSSION

       Between 2002 and 2004 Fern obtained student loans totaling $14,980 under
the William D. Ford Direct Loan Program under three separate promissory notes.
She used these funds to participate in classes to become an accounting clerk. After
two unsuccessful attempts to complete a required class she could not finish the
program. In 2007 Fern obtained an additional student loan of approximately $5,300
from the Ford Program to attend Capri College for training as an esthetician. After
graduating she rented space at a commercial tanning salon and began working in her
field of study. Being unable to build up the necessary clientele to support her family
she left this job. Fern has never made a payment on her student loan obligations. At
the time of trial the aggregate balance owing on Fern’s student loans exceeded
$27,000.

      Discharge of student loan debt in bankruptcy is governed by 11 U.S.C. §
523(a)(8) which in relevant part states: “A discharge under section 727 . . . of this

1
 The Honorable Thad J. Collins, United States Bankruptcy Judge for the Northern
District of Iowa.
title does not discharge an individual debtor from any debt [for education loans]
unless excepting such debt from discharge . . . would impose an undue hardship on
the debtor and the debtor's dependents . . . .” The debtor bears the burden to prove
undue hardship by a preponderance of the evidence. Grogan v. Garner, 498 U.S.
279, 289-91 (1991). The term undue hardship is not defined in the Bankruptcy Code.
Consequently, the standards to determine what constitutes undue hardship have been
developed by the courts. A majority of Circuits follow the test adopted by the
Second Circuit in Brunner v. New York State Higher Education Services Corp., 831
F.2d 395 (2d Cir. 1987). The Brunner analysis has been expressly rejected in this
Circuit:

             We are convinced that requiring our bankruptcy courts to
             adhere to the strict parameters of a particular test would
             diminish the inherent discretion contained in § 523(a)(8) .
             . . We believe that fairness and equity require each undue
             hardship case to be examined on the unique facts and
             circumstances that surround the particular bankruptcy.

Long, 322 F.3d at 554. Instead, the Eighth Circuit follows a more flexible approach
under a totality of the circumstances test. Id. Three factors are evaluated to
determine undue hardship under this test: (1) the debtor’s past, present, and
reasonably reliable future financial resources; (2) a calculation of the debtor’s and
her dependent’s reasonable necessary living expenses; and (3) any other relevant
facts and circumstances surrounding each particular bankruptcy case. Id.

      1.     Past, Present and Future Financial Resources

       Fern is a 35 year old single mother of three children ages 3, 11 and 16. For
the last 6 years she has worked at Focus Services, LLC. This job provides her with
a monthly income of $1,506.78 and offers flexibility so she can provide the
necessary care for her children when needed. The family also receives food stamps
and rental assistance. The children’s fathers have made minimal or no child support
payments. Efforts to enforce these obligations have been unsuccessful.

      Fern’s income history has remained consistent and is in line with her current
earnings. She has never earned more than $25,000 annually. Her take home pay of
$1,506.78 is supplemented by public assistance which results in a modest amount
upon which to support a family of four. She has no savings or other sources of
income. In the past, Fern’s mother has loaned money to her daughter. Because her
mother is retiring, she will be unable to provide this safety net to Fern. The evidence
supports the Bankruptcy Court’s conclusion that Fern’s income has been consistent
and is unlikely to improve in the future which weighs in favor of discharging the
student loans for undue hardship.

      2.     Reasonable and Necessary Living Expenses

      “To be reasonable and necessary, an expense must be ‘modest and
commensurate with the debtor’s resources.’” Jesperson, 571 F.3d at 780 (citing In
re DeBrower, 387 B.R. 587, 590 (Bank. N.D. Iowa 2008)). Fern’s monthly income
from all sources totals $2,413. The family’s monthly expenses are $2,475. Based
upon these figures there is a shortfall of $62 each month to meet the family’s living
expenses. The record supports the Bankruptcy Court’s conclusion that Fern’s
monthly expenses are reasonable, necessary, modest and commensurate with her
income and weigh in favor of discharging the student loans for undue hardship.

      3.     Other Relevant Facts and Circumstances

      This factor permits evaluation of a wide range of facts and issues that may be
relevant to determining undue hardship, including:

             (1) total present and future incapacity to pay debts for
             reasons not within the control of the debtor; (2) whether
             the debtor has made a good faith effort to negotiate a
             deferment or forbearance of payment; (3) whether the
             hardship will be long-term; (4) whether the debtor has
             made payments on the student loan; (5) whether there is
             permanent or long-term disability of the debtor; (6) the
             ability of the debtor to obtain gainful employment in the
             area of the study; (7) whether the debtor has made a good
             faith effort to maximize income and minimize expenses;
             (8) whether the dominant purpose of the bankruptcy
             petition was to discharge the student loan; and (9) the ratio
             of student loan debt to total indebtedness.

Brown v. Am. Educ. Servs., Inc. (In re Brown), 378 B.R. 623, 626-27 (Bankr. W.D.
Mo. 2007) (citing VerMaas v. Student Loans of N.D. (In re VerMaas), 302 B.R. 650,
656-57 (Bankr. D. Neb. 2003); Morris v. Univ. of Ark., 277 B.R. 910, 914 (Bankr.
W.D. Ark. 2002)). The purpose of this final inquiry allows a court to consider any
other relevant information that would be persuasive to overcome the income and
expense analysis of undue hardship under the first two factors of the totality of the
circumstances test.

       Fern testified that her vehicle requires maintenance and that she will need to
replace it. She believes such a purchase is unavailable without her mother’s
assistance or co-signature because the student loan obligations are reflected on her
credit report, which hinders her ability to borrow money. The education obtained
with the student loan proceeds has not resulted in gainful employment for Fern. She
occasionally reviews job postings but has discontinued actively submitting
applications. According to Fern, if she could find a higher paying job she would
gladly take it.

       None of Fern’s loans has ever been placed in repayment status, instead they
have always been classified as deferred or in forbearance meaning that no payment
is required. The Department of Education contends that Fern qualifies for at least
two repayment plans. While the availability of repayment options is a relevant fact,
it cannot be the only basis to consider in determining undue hardship. Lee v. Regions
Bank Student Loans, (In re Lee), 352 B.R. 91, 95 (B.A.P. 8th Cir. 2006). Relying
upon Jesperson, the Department suggests that Fern is qualified for a repayment
program where her “payment” would be $0.00 and because that “payment” amount
will not affect her current standard of living the student loans should not be
discharged. See 571 F.3d at 779 (ability to make some payment on student loans
and maintain a “minimal standard of living” does not qualify as an undue hardship).

       There are substantial and important differences between this case and
Jesperson which must be placed in context. Jesperson was a lawyer who owed in
excess of $300,000 in student loans. The Court of Appeals identified numerous
grounds in reaching its conclusion that Jesperson’s circumstances did not qualify for
an undue hardship discharge of his student loan debt. These included: his age, good
health, number of degrees, marketable skills, lack of dependents, self-imposed
conditions which limited his monthly income and a failure to pay any amount on the
student loan when he had sufficient income to do so. Id. at 782. Most notably,
Jesperson could afford a monthly payment of $629 under an income contingent
repayment plan. In contrast, Fern has never been required to make a payment, and
under either the Income Contingent Repayment Program or PAYE this would still
remain the case. We do not interpret Jesperson to stand for the proposition that a
monthly payment obligation in the amount of zero automatically constitutes an
ability to pay.
      The Department also states that the Bankruptcy Court’s conclusions about
Fern’s emotional burden related to the student loan obligations, the continued
accrual of interest on the loans, the negative credit effect of the loans, and the
potential tax obligation when the repayment plan expires were in error. We do not
agree. These additional observations identified by the Bankruptcy Court simply
served to supplement its determination of undue hardship under the totality of the
circumstances test.

      For the reasons stated there is no error in the Bankruptcy Court’s
determination that Fern’s student loans are dischargeable based upon undue
hardship. Accordingly, the Bankruptcy Court’s order is AFFIRMED.

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