Brief of Amici Curiae Consumer Bankruptcy and Student Loan Academics in Support of Petitioner

Abstract

To interpret the open-ended phrase “undue hardship,” courts must look not just to the goals of the nondischargeability provision in isolation, but also to the broader purposes of Title IV of the Higher Education Act (HEA), the statutory scheme governing federal student loans. Over 90 percent of outstanding student loans were made under Title IV programs, nondischargeability was originally adopted as an amendment to the HEA, and the Brunner test itself purports to be based on the “purposes of the guaranteed student loan program.” In re Brunner, 46 B.R. 752, 756 (S.D.N.Y. 1985), aff’d, 831 F.2d 395 (2d Cir. 1987). Overly stingy application of the undue-hardship provision undermines the expressly articulated overarching goals of the federal student loan programs. Fear of debt and student debt itself deter students, particularly low-income students, from starting and completing higher education. Unmanageable debt discourages borrowers from using their education for the economic benefit of society because their earnings simply go to creditors. Fear of financial distress distorts students’ career choices. Many student loans are harmful to borrowers, who would have been better off never borrowing for higher education. By denying borrowers escape from debts they cannot repay, nondischargeability exacerbates all these effects, each of which undermines a goal of Title IV. The Brunner decision imagines a harsh “quid pro quo” in which the federal government “exacts” a price of near-total nondischargeability in exchange for making student loans. Brunner, 46 B.R. at 756. Although the Brunner opinion asserts that this arrangement advances the purposes of the student loan programs, it cites no evidence of the programs’ aims and ignores their true goals. The same is true of the Fifth Circuit’s decisions adopting and applying Brunner. These decisions are thus fundamentally flawed. To be sure, Congress did limit the dischargeability of student loans, despite the tension between nondischargeability and the goals of the student loan programs. It thought doing so would combat abuse and enhance repayment. But the limit on dischargeability contains an “undue hardship” exception of uncertain scope. In applying that exception, courts should act not just to fight abuse and recover money but also to advance the education-promoting goals of the overall statutory scheme.