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 Contributing Editor: Kesha Tanabe, Tanabe Law
BAP___Page_v__JP_Morgan_Chase_Bank.pdf 

            In In re Page, 592 B.R. 334 (B.A.P. 8th Cir. 2018), the debtor sought to discharge a student loan debt, but the Bankruptcy Court found in favor of her student loan servicer. On appeal, the B.A.P. closely examined both the language and legislative history of 11 U.S.C. §523(a)(8), reversed the Bankruptcy Court’s order and remanded for additional findings. 

            First, to be excepted from discharge, the debt at issue must have been an “education loan” as such term is used in Section 523(a)(8).  Debtor argued that many features of the debt were akin to an ordinary consumer loan and she had used the loan proceeds for non-educational expenses.  The B.A.P. was unpersuaded by the Debtor’s attempts to recharacterize the loan, citing the “purpose test” to determine that the Debtor’s loan was indeed “educational.”  For example, where the loan is part of a financial aid package from a university, contains education-related terms, or where the borrower must be a student to qualify, the B.A.P. stated there can be no genuine issue of material fact about whether the loan is an “education loan” under Section 523(a)(8). 

            Second, to fall within the scope of 523(a)(8), the student loan servicer had the burden to prove that “TERI”, a nonprofit entity, had “funded” the student loans in question.   In this context, “funded” does not mean that the nonprofit provided the actual funds disbursed to the borrower.  Rather, the B.A.P. adopted the “meaningful part” test, holding that a nonprofit entity must have played a “meaningful part in procurement of the loans at issue.”  Specifically, the B.A.P. explained that a nonprofit entity must have “committed financial resources to the loan program, or contributed something of value to make the program successful,” or even given a guarantee of the loan.   In the underlying case, the only relevant finding of fact was that TERI had provided a mailing address for loan applications submitted by regular mail or overnight delivery.  It was unclear whether TERI received all of the applications in the student loan program used by the Debtor, or just a subset of applications.  It was also unclear whether TERI actually handled the Debtor’s application.  Further, there was no evidence in the record about whether TERI merely forwarded applications to another party, or whether its employees were involved in more substantial activity such as reviewing and processing the applications.  Because exceptions to discharge must be construed narrowly, the B.A.P. reversed and remanded for additional findings about whether the role of TERI in the debtor’s case was sufficient to bring her loan within the scope of 523(a)(8)(i) and except her student loan debt from discharge.