                           In the

United States Court of Appeals
              For the Seventh Circuit

No. 12-3592

S USAN M. K RIEGER,
                                              Plaintiff-Appellant,
                               v.

E DUCATIONAL C REDIT M ANAGEMENT C ORPORATION,

                                             Defendant-Appellee.


           Appeal from the United States District Court
               for the Central District of Illinois.
             No. 12-1164—Joe Billy McDade, Judge.



    S UBMITTED M ARCH 15, 2013—D ECIDED A PRIL 10, 2013




  Before E ASTERBROOK, Chief Judge, and M ANION and
R OVNER, Circuit Judges.
  E ASTERBROOK, Chief Judge. Susan Krieger is destitute.
Her entitlement to a discharge in bankruptcy is unques-
tioned. But her largest creditor—Educational Credit
Management, which acts on behalf of some federal loan
guarantors—asked the bankruptcy judge to exempt her
student loans from the discharge, relying on 11 U.S.C.
§523(a)(8). This subsection excludes educational loans
2                                               No. 12-3592

“unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the
debtor”. We have understood this language this way:
    “Undue hardship” requires a three-part showing
    (1) that the debtor cannot maintain, based on
    current income and expenses, a “minimal” stan-
    dard of living for [himself] and [his] 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 of the student
    loans; and (3) that the debtor has made good
    faith efforts to repay the loans.
In re Roberson, 999 F.2d 1132, 1135 (7th Cir. 1993), quoting
from Brunner v. New York State Higher Education Services
Corp., 831 F.2d 395, 396 (2d Cir. 1987) (bracketed changes
made by Roberson).
  A bankruptcy judge concluded, following a trial, that
this standard has been met. 2012 Bankr. L EXIS 1449
(Bankr. C.D. Ill. Apr. 5, 2012). The evidence shows that
Krieger cannot pay the debt now or in the foreseeable
future. She is living with her mother, age 75, in a rural
community where few jobs are available; mother and
daughter between them have only a few hundred dollars
(from governmental programs) every month. She is too
poor to move in search of better employment prospects
elsewhere, and her car, which is more than a decade
old, needs repairs. She lacks Internet access, which
coupled with the lack of transportation hampers a
search for work.
No. 12-3592                                            3

  Educational Credit conceded that part (1) of this
circuit’s standard has been met but argued that parts
(2) and (3) have not been. Its argument was based on
what it characterized as Krieger’s failure to search
harder for work (she has made “only” 200 or so applica-
tions during the past decade) and to accept work at
jobs other than the ones for which her training best
suits her (the educational debts were incurred to
obtain training as a paralegal, and most of Krieger’s
searching has been for paralegal jobs). The bankruptcy
judge concluded, however, that Krieger had made a
thorough effort. Educational Credit does not contend
that she has the resources to sustain herself during a
wider geographical search. And the bankruptcy judge
observed that Krieger’s good faith is demonstrated not
only by her decade-long search but also her decision
to use a substantial chunk of a divorce settlement to pay
off as much of the educational loan as she could. (The
amount remaining is about $25,000.)
  A district judge reversed and held that the educa-
tional debt cannot be discharged. 482 B.R. 238 (C.D. Ill.
2012). The district judge thought that Krieger could
have searched harder for work, especially in recent
years (when, she conceded, her applications had tapered
off in light of the failure of the many earlier applica-
tions). And the judge also thought that Krieger fails the
good-faith standard, because she had not enrolled in a
program that would have offered her a 25-year payment
schedule. The judge allowed that Krieger could not
pay even $1 a year as now situated but thought that
accepting a deferred payment schedule would have
4                                               No. 12-3592

shown good faith by committing to pay some of the
debt should she become employed in the future.
  We start with that part of the analysis. The district
judge did not doubt that Krieger has paid as much as
she could during the 11 years since receiving the educa-
tional loans. Instead the judge concluded that good
faith entails commitment to future efforts to repay.
Yet, if this is so, no educational loan ever could be dis-
charged, because it is always possible to pay in the
future should prospects improve. Section 523(a)(8) does
not forbid discharge, however; an unpaid educational
loan is not treated the same as a debt incurred
through crime or fraud. The statutory language is that a
discharge is possible when payment would cause an
“undue hardship”. It is important not to allow judicial
glosses, such as the language in Roberson and Brunner,
to supersede the statute itself.
  The bankruptcy judge found that Krieger has acted in
good faith. That standard combines a state of mind (a
fact) with a legal characterization (a mixed question of
law and fact). Findings of fact must stand unless
clearly erroneous, and cases such as Pullman-Standard
v. Swint, 456 U.S. 273 (1982), and Icicle Seafoods, Inc. v.
Worthington, 475 U.S. 709 (1986), show that mixed ques-
tions likewise are treated as factual in nature. We ap-
preciate the possibility that, when the only real dispute
is legal, the resolution of a mixed question may be a
legal one, open to plenary appellate resolution. We have
said that about some disputes under §523(a)(8). See
Goulet v. Educational Credit Management Corp., 284 F.3d 773,
No. 12-3592                                                 5

777 (7th Cir. 2002); Roberson, 999 F.2d at 1137. Once again,
however, we must remember that the statutory inquiry
is “undue hardship,” a case-specific, fact-dominated
standard, which implies deferential appellate review.
See, e.g., Cooter & Gell v. Hartmarx Corp., 496 U.S. 384
(1990); Mucha v. King, 792 F.2d 602 (7th Cir. 1986). To
the extent that the district judge thought that debtors
always must agree to a payment plan and forgo a
discharge, that is a proposition of law—an incorrect
proposition, for the reasons we have given. What
remains is a predominantly factual understanding, on
which the bankruptcy judge’s findings must prevail.
(Educational Credit does not contend, and the district
judge did not hold, that any is clearly erroneous.)
  As for the second part of the Roberson standard: The
bankruptcy judge found that Krieger’s straightened
circumstances are likely to persist indefinitely. This is a
factual finding and not clearly erroneous. Krieger lives
in a rural area with few jobs. She lacks the resources
to travel in search of employment elsewhere. Educational
Credit contends that she could and should accept jobs
that pay less than a paralegal position, but the bank-
ruptcy judge found that she had applied without
success and that “[n]ever has the Court seen such utter
futility be the result of a debtor’s job search efforts.” 2012
U.S. Bankr. L EXIS 1449 at *16. She is 53 years old and
has not held a job since 1986, when she left the work
force to raise a family. She did not earn more than
$12,000 a year in her working career (between 1978 and
1986). That’s not the sort of background employers are
looking for. There is no reason to think that a brighter
6                                               No. 12-3592

future is in store; indeed, both the district judge and
Educational Credit concede that the result of a 25-year
payment plan probably would be no payments, with
interest accumulating, followed by forgiveness when
Krieger reaches age 78 (forgiveness of the unpaid balance
is one inducement to accept a deferred-payment plan).
   Finally, although there has been no contest about the
first part of the Roberson standard, it is worth recollecting
that Educational Credit concedes (as the bankruptcy
judge found) that Krieger simply cannot pay. She is essen-
tially out of the money economy and living a rural, sub-
sistence life. She does not have assets or income and,
the bankruptcy judge found, is not likely to acquire any.
  In Roberson we boiled the three criteria down to “cer-
tainty of hopelessness”. 999 F.2d at 1136. That sounds
more restrictive than the statutory “undue hardship,”
but at all events the bankruptcy judge found that
Krieger’s situation is hopeless. That may be unduly
pessimistic, but a judge asked to apply a multi-factor
standard interpreting an open-ended statute neces-
sarily has latitude; the more vague the standard, the
harder it is to find error in its application. The ultimate
finding of “undue hardship” is neither clearly erroneous
nor an abuse of discretion. The judgment of the district
judge is reversed, and the case is remanded with instruc-
tions to reinstate the discharge issued by the bank-
ruptcy judge.
No. 12-3592                                               7

   M ANION, Circuit Judge, concurring. The bankruptcy
judge, after observing that debtor Susan Krieger had
engaged in what he described as an extraordinarily
persistent job search for over a decade, concluded
that “[n]ever has the Court seen such utter futility be
the result of a debtor’s job search efforts. [She] is
truly destitute and has been in these straits for many
years without any respite.” In a well-reasoned opinion,
the district court disagreed. Although I prefer the district
court’s analysis, I recognize that our standard of review
requires that in order to reverse we must determine
that the bankruptcy judge’s key findings of fact were
clearly erroneous. I accept this court’s conclusion that
with a mixed determination of law and fact, we still
must follow the clearly erroneous approach. Therefore
I concur with the court’s order.
  As it is presented, this case is truly an exception. But
Ms. Krieger is fifty-three years old and is in good
health. She resides with her seventy-five-year-old
mother on a small rural farm. She has given up
looking for a job, a search which she concludes is an
effort in futility. Under normal circumstances that should
not happen. She is healthy and well-educated. In 1999,
Krieger received an Associate of Arts degree in Business
Accounting from St. Charles Community College. In
2000, she enrolled at Webster University in Webster
Groves, Missouri, where she earned a paralegal certifi-
cate and graduated with a Bachelor of Arts in Legal
Studies. She had a high GPA and she received significant
recognition for her academic achievements. She clearly
received the education that she borrowed for. Yet as a
8                                                 No. 12-3592

result of years of non-payment, her remaining $17,000
student-loan debt has grown to approximately $25,000
with interest.1
  The bankruptcy court was impressed by her diligent
efforts to obtain a job. As the court notes, she applied
for about 200 jobs over a ten-year period. Over a ten-
year period that averages out to less than two applica-
tions per month, but presumably she funneled all of
those applications into an earlier part of the decade
before she dropped out of the work force and moved
in with her mother.
   Unfortunately, she is not in a class by herself. Recently
the Chicago Tribune cited an Equifax National Con-
sumer Credit Trends Report finding that “banks wrote
off $3 billion of student loan debt in the first two months
of 2013, up more than 36% from the year-ago period.”
Elvina Nawaguna, Student loan write-offs hit $3 billion in
first two months of year, Chi. Trib., Mar. 25, 2013.2 One
would hope that these defaults were for better reasons
than those presented by Ms. Krieger. But although ap-
plicants for federal student aid generally must demon-



1
  The five separate student loans she originally received
totaled $25,416 in principal, but with proceeds of a divorce
settlement and other minor sources of income, she repaid
several thousand dollars.
2
   htt p ://a rticles.chicag otribune.com /2013-03-25/business/
sns-rt-us-usa-studentloans-delinquencybre92o11k-20130325_1_
student-loan-loan-write-offs-offer-more-flexible-repayment
(last visited on Apr. 5, 2013)
No. 12-3592                                                  9

strate “financial need,” applicants need not show that
they will be capable of repaying the student-loan debts
they incur. See Federal Student Aid, Basic Eligibility
Criteria.3 Moreover, outstanding student loan debt in the
United States is approaching $1 trillion. See FRBNY
Research and Statistics Group, Quarterly Report on House-
hold Debt and Credit 1 (Feb. 2013). It is obvious that a
crisis is at hand. Ms. Krieger’s successful petition for a
discharge of her $25,000 obligation should be labeled as
an extreme exception and an outlier. But with many
people struggling to make payments on their loans,
will they see in this case and perhaps others like it an
excuse to avoid their own student-loan obligations?
  A good and expensive education is no longer a
guarantee that a good job will ensue. The Wall Street
Journal recently featured an article headlined, “College
Grads May Be Stuck in Low-Skill Jobs.” Ben Casselman,
Wall St. J., Mar. 26, 2013, at A5. While college tuition
continues to rise, job opportunities appear to be con-
tracting. Hope remains that an eventually improving
economy will generate more job opportunities. But for
those who perceive that their employment-seeking
efforts are at a dead end, bankruptcy should not be
the answer. Rather than challenging the non-dis-
chargeability barrier in bankruptcy, those who have
concluded that there is no way they can pay off the
debt should be required to enroll in the William D.



3
  http://www.studentaid.ed.gov/eligibility/basic-criteria (last
visited on Apr. 5, 2013)
10                                                  No. 12-3592

Ford Income-Based Repayment Plan. Under that plan,
a borrower’s monthly payment is limited to 15% of dis-
cretionary income (defined as any income above
150% of the poverty line). In Ms. Krieger’s case, she
would have owed zero dollars unless she received an
annual income of something approaching $17,000. And
after twenty-five years under the IBR program, any
remaining debt is forgiven.4 This may sound like an
unattractive alternative, but as the district court noted,
this is certainly better than erasing what should be
an undischargeable debt given Ms. Krieger’s age, good
health, and solid education.




4
  Although the court treats this repayment program as only
addressing Ms. Krieger’s future ability to repay her student
loans, the program was available to her well before she filed
her bankruptcy petition. Ms. Krieger’s failure to inquire about
and take advantage of this program before filing for bank-
ruptcy is “evidence of a less than good faith effort to repay
[her] student loan debts.” Educ. Credit Mgmt. Corp. v. Jesperson,
571 F.3d 775, 782 (8th Cir. 2009).


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