In general, a debtor cannot obtain a discharge of student loan obligations in a bankruptcy case. That general principle is, however, subject to certain qualifications. The most frequently discussed is a debtor’s ability to seek a hardship discharge of the obligations under section 523(a)(8) of the U.S. Bankruptcy Code. 11 U.S.C. §§ 101, et seq. (the “Code”). Nevertheless, even before reaching the question of “hardship,” the Court must determine whether the student loan obligations at issue fall within the statutory categories protected by Congress under section 523(a)(8)(A) or (B) of the Code. This latter question is the subject of the parties’ respective motions for summary judgment. It basically requires the Court to consider whether the category of “nondischargeable student loans” includes any loan made to a student for educational purposes.
Section 523(a)(8) includes three subsections addressing educational debt that is excepted from discharge. The parties do not argue that either section 523(a)(8)(A)(i) or 523(a)(8)(B) is applicable to this case. Rather, the defendant asserts that its debt is covered by section 523(a)(8)(A)(ii), as “an obligation to repay funds received as an educational benefit, scholarship, or stipend.” 11 U.S.C. § 523(a)(8)(A)(ii).
The Debtor filed this chapter 7 case on March 8, 2016. On April 21, 2017, she initiated this adversary proceeding to determine the dischargeability of a loan used, in part, for educational purposes. The Debtor’s Complaint names numerous entities as defendants because the subject loan has changed hands several times since the execution of the original documents. GS2 Grantor Trust 2016-A (the “Defendant”), assignee of SLF V-2015 Trust, was the only defendant to file an Answer to the Debtor’s Complaint.
On June 29, 2017, after discovery was completed, the Defendant filed its Motion for Summary Judgment, and the Debtor filed a response thereto. On June 30, 2017, the Debtor filed her Motion for Summary Judgment, and the Defendant filed a response thereto. The Defendant’s response did not contest the Debtor’s assertion that the loan is not a “qualified education loan” under section 523(a)(8)(B). Accordingly, the only disputed issue before the Court is whether the Defendant’s debt is excepted from discharge under section 523(a)(8)(A)(ii). Counsel for the parties confirmed the limited scope of the dispute at oral argument on the motions for summary judgment, held on September 6, 2017.
In March 2008, the Debtor enrolled in a Medical Education Readiness Program (“MERP”). MERP is a preparatory course of instruction that, upon completion, allows students to enroll at Ross University School of Medicine. MERP is not qualified as a Title IV institution under the Higher Education Act of 1965 (as amended) and federal aid, grants, or loans are not available to students attending MERP. The Debtor completed MERP, and she enrolled at Ross University for the fall 2008 semester. The Debtor did not complete her coursework or graduate from Ross University, as she was dismissed from Ross University in December 2008.
The Debtor financed her participation in MERP. Specifically, she applied for and received a CitiAssist Health Professions Loans Online Loan from Citibank N.A. (the “Loan”). Citibank disbursed approximately $23,670.00 to the Debtor under the Loan on March 20, 2008. The Debtor used the proceeds of the Loan to pay for MERP fees and her books for the program, as well as rent and living expenses incurred while attending the program. Citibank sold its interest in the Loan to SLF V-2015 Trust, which then assigned its interest in the Loan to GS2 Depositor 2016-A SPV, LLC. Through a Trust Agreement, GS2 Depositor 2016-A SPV, LLC, deposited the Loan with the Defendant, which is the current holder of the Loan. The Defendant asserts that the current balance is approximately $37,175.25, plus interest.
The Defendant argues that the Loan is nondischargeable in the Debtor’s chapter 7 case under section 523(a)(8)(A)(ii) because the Loan qualifies as “an obligation to repay funds received as an educational benefit” and the Debtor is not seeking a hardship discharge. The Debtor contests that position and asserts that the Loan is not protected against discharge under the statute. The Court has reviewed the parties’ respective pleadings, the positions of their counsel at oral argument, and the relevant statutory and case law addressing the disputed legal issue. The Court’s analysis and conclusions of law are set forth below.