Tuition Debt was Not Dischargeable, Notwithstanding the Lack of a Formal Exchange of Money

Tuition Debt was Not Dischargeable, Notwithstanding the Lack of a Formal Exchange of Money

Debtor enrolled at Stout (a state university) in 2008. Debtor signed a Payment Plan Agreement with Stout on June 27, 2008 (the “Plan”). The Plan permitted Debtor to register for classes but defer full payment of her tuition according to a schedule defined in the Plan. Specifically, the Plan called for full payment of tuition for the summer term by the end of the first week of summer classes. The Plan did not contain an expiration date.

In 2011, Debtor withdrew from Stout, but she re-enrolled three years later in 2014. Debtor enrolled in classes for the summer term of 2015, but she did not immediately pay her tuition for that term and apparently planned to rely on the deferred payment schedule in the Plan. Debtor failed to make the tuition payment. Without paying for the classes, Debtor earned seven credits during the 2015 summer term and qualified for a degree. Stout refused to issue the degree, insisting Debtor first pay her tuition. Upon a request from Stout, the Wisconsin Department of Revenue intercepted Debtor’s 2016 tax return and forwarded it toward payment of the tuition. Once the tuition was paid through the tax return intercept, Stout issued the degree.

Debtor alleges the unpaid tuition, which accrued in 2015, should have been discharged when her chapter 7 was completed in 2016. Stout replies the tuition was not eligible for discharge because it should be characterized as a student loan under 11 U.S.C. § 523(a)(8), IRC § 221(d)(2), and 20 U.S.C. § 1087ll.

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