I spend a lot of time drafting complaints in adversary proceedings to help people discharge their student loans in bankruptcy. In doing that, I often I have to explain how the laws have changed over the years about when a debtor could discharge her student loans. Instead of keeping all that information in dull pdfs, I turned them into this slide so it can be quickly referenced.

1. STUDENT LOANS &
THE AMENDMENTS TO 523(A)(8)
Discharged

2. Bankruptcy
Amendments and
Federal Judiciary
Act of 1984
§ 439A of the
Higher Education
Act
The Bankruptcy
Reform Act of
1978
Act on August
14, 1979
1976
Crime Control
Act of 1990
Higher Education
Amendments of
1998
Bankruptcy Abuse
Prevention and
Consumer
Protection Act of
2005
The Amendments

3. The Bankruptcy Act Commission
In 1970, Congress established the Bankruptcy Act Commission. Its
purpose? Review the Bankruptcy Act of 1898 and recommend changes.
One recommendation it made was to make educational debt
nondischargeable only if the debt had first become due less than 5 years
before the debtor filed his bankruptcy case repaying the loan would not
impose an undue hardship on the debtor or his dependents.
The Commission proposed this discharge limitation to preempt “potential
abuses” by student loan debtors seeking to discharge their student loan
debt without having attempted repayment and in the absence of
extenuating circumstances.
The Commission proposed this despite
evidence showing that less than 1% of
federally backed student loans were
discharged in bankruptcy.

4. The Higher Education Act Section 439A
In 1976, Congress amended the Higher Education Act of 1965 by adding
section 439A.
That section allowed chapter 7 debtors to discharge federally guaranteed
or insured student loans in two instances:
1. After 5 years have passed since entering repayment on the loan; or
2. Earlier than 5 years if repayment would cause an undue hardship.
The Commission proposed this despite
evidence showing that less than 1% of
federally backed student loans were
discharged in bankruptcy.

5. At a time when political, business, and social morality
are major issues, it is dangerous to enact a law that
is almost specifically designed to encourage fraud.
For example, as a student leaves college to find a job,
that student would have two options:
(1) repay a substantial loan at a time when that
student’s financial situation is probably at its lowest,
or
(2) discharge the debt in bankruptcy, having received
the benefit of a free education.
If Student A elects to repay the loan, honoring the
legal and moral obligation that was incurred, he
begins his career with a substantial debt and the
accompanying financial pressure.
Meanwhile, Student B (who chooses to declare
bankruptcy) can begin with a clean slate and is free to
spend his initial earnings on other items.
By combining the clean slate with the excellent credit
rating that accompanies a bankruptcy (since the
discharged debtor cannot go bankrupt again for six
years), Student B is rewarded for refusing to honor a
legal obligation. The lesson that Students A and B
have learned is that it “does not pay” to honor one’s
debts or other legal obligations.
“A valuable educational program should not be
destroyed because of a loophole that Congress can
easily correct.”
Comments of Rep. Allen Ertel

6. 439A Amendment
(a) A debt which is a loan insured or guaranteed under the authority of this
part may be released by a discharge in bankruptcy under the Bankruptcy
Act only if such discharge is granted after the five-year period (exclusive
of any applicable suspension of the repayment period) beginning on the
date of commencement of the repayment period of such loan, except that
prior to the expiration of that five-year period, such loan may be released
only if the court in which the proceeding is pending determines that
payment from future income or other wealth will impose an undue hardship
on the debtor or his dependents.
(b) Subsection (a) of this section shall be effective with respect to
Effective date, any proceedings begun under the Bankruptcy Act on or
after September 30, 1977.
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.

7. The Bankruptcy Reform Act of 1978
In 1978, Congress codified section 439A into 11 USC § 523(a)(8) of the
newly formed Uniform Bankruptcy Code:
(a) A discharge under section 727 … of this title does not discharge an
individual debtor from any debt
(8) to a governmental unit, or a nonprofit institution of higher education,
for an educational loan, unless—
(A) such loan first became due before five years before the date of the
filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose
an undue hardship on the debtor and the debtor's dependents;
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.

8. Act on August 14, 1979
Congress amended 523(a)(8) to read:
a) A discharge under section 727 … of this title does not discharge an
individual debtor from any debt
(8) for an educational loan made, insured, or guaranteed by a
governmental unit, or made under any program funded in whole or in part
by a governmental unit or a nonprofit institution of higher education ,
unless—
(A) such loan first became due before five years (exclusive of any
applicable suspension of the repayment period) before the date of the
filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose
an undue hardship on the debtor and the debtor's dependents;
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 96–56, § 3

9. Comparing Amendments
(a) A discharge under section 727 … of this title
does not discharge an individual debtor from any
debt
(8) to a governmental unit, or a nonprofit
institution of higher education, for an educational
loan, unless—
(A) such loan first became due before five years
before the date of the filing of the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the
debtor and the debtor's dependents;
(a) A discharge under section 727 … of this title
does not discharge an individual debtor from any
debt
(8) for an educational loan made insured, or
guaranteed by a governmental unit, or made
under any program funded in whole or in part by
a governmental unit or a nonprofit institution of
higher education, unless—
(A) such loan first became due (exclusive of any
applicable suspension of the repayment period)
before five years before the date of the filing of
the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the
debtor and the debtor's dependents;
Bankruptcy Reform Act of 1978 Act of August 14, 1979
vs.

10. Bankruptcy Amendments and
Federal Judiciary Act of 1984
Congress next amended 523(a)(8) on July 10, 1984. Congress amended the
subsection by striking the phrase it had just added in the last amendment:
“of higher education”. That change resulted in broadening the type of
institutions covered.
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 98–353, § 454(a)(2)

11. Comparing Amendments
(a) A discharge under section 727 … of this title does not
discharge an individual debtor from any debt
(8) from an educational loan made insured, or guaranteed
by a governmental unit, or made under any program
funded in whole or in part by a governmental unit or a
nonprofit institution of higher education, unless—
(A) such loan first became due (exclusive of any
applicable suspension of the repayment period) before
five years before the date of the filing of the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor
and the debtor's dependents;
(a) A discharge under section 727 … of this title does
not discharge an individual debtor from any debt
(8) from an educational loan made insured, or
guaranteed by a governmental unit, or made under any
program funded in whole or in part by a governmental
unit or a nonprofit institution, unless—
(A) such loan first became due before five years
(exclusive of any applicable suspension of the
repayment period) before the date of the filing of the
petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor
and the debtor's dependents;
Act of August 14, 1979 Federal Judiciary Act of 1984
vs.

12. Crime Control Act of 1990
Congress amended 523(a)(8) to read:
(a) A discharge under section 727 … of this title does not discharge an individual
debtor from any debt
(8) for an educational benefit overpayment or loan made insured, or guaranteed
by a governmental unit, or made under any program funded in whole or in part by
a governmental unit or a nonprofit institution, or for an obligation to repay funds
received as an educational benefit, scholarship or stipend, unless—
(A) such loan, benefit, scholarship, or stipend overpayment first became due
seven years (exclusive of any applicable suspension of the repayment period)
before the date of the filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose an
undue hardship on the debtor and the debtor's dependents;
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 101–647, § 3621

13. Comparing Amendments
(a) A discharge under section 727 … of this title
does not discharge an individual debtor from any
debt
(8) for an educational loan made insured, or
guaranteed by a governmental unit, or made
under any program funded in whole or in part by a
governmental unit or a nonprofit institution,
unless—
(A) such loan first became due before five years
(exclusive of any applicable suspension of the
repayment period) before the date of the filing of
the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the
debtor and the debtor's dependents;
(a) A discharge under section 727 … of this title does
not discharge an individual debtor from any debt
(8) for an educational benefit overpayment or loan
made insured, or guaranteed by a governmental unit,
or made under any program funded in whole or in part
by a governmental unit or a nonprofit institution, or
for an obligation to repay funds received as an
educational benefit, scholarship or stipend, unless—
(A) such loan, benefit, scholarship, or stipend
overpayment first became due seven years (exclusive
of any applicable suspension of the repayment period)
before the date of the filing of the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor
and the debtor's dependents;
Federal Judiciary Act of 1984 Crime Control Act of 1990
vs.

14. Higher Education Amendments of 1998
On October 7, 1998, Congress amended 523(a)(8) eliminated the time-lapse
requirement. This change made certain education loans nondischargeable in the
absence of undue hardship.
(a) A discharge under section 727 … of this title does not discharge an individual
debtor from any debt
(8) for an educational benefit overpayment or loan made insured, or guaranteed
by a governmental unit, or made under any program funded in whole or in part by
a governmental unit or a nonprofit institution, or for an obligation to repay funds
received as an educational benefit, scholarship or stipend, unless excepting such
debt from discharge under this paragraph will impose an undue hardship on the
debtor and the debtor's dependents;
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 105–244, § 971(a)

15. Comparing Amendments
(a) A discharge under section 727 … of this title does
not discharge an individual debtor from any debt
(8) for an educational benefit overpayment or loan
made insured, or guaranteed by a governmental unit,
or made under any program funded in whole or in part
by a governmental unit or a nonprofit institution, or for
an obligation to repay funds received as an
educational benefit, scholarship or stipend, unless—
(A) such loan, benefit, scholarship, or stipend
overpayment first became due seven years (exclusive
of any applicable suspension of the repayment period)
before the date of the filing of the petition; or
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor
and the debtor's dependents;
(a) A discharge under section 727 … of this title
does not discharge an individual debtor from any
debt
(8) for an educational benefit overpayment or
loan made insured, or guaranteed by a
governmental unit, or made under any program
funded in whole or in part by a governmental unit
or a nonprofit institution, or for an obligation to
repay funds received as an educational benefit,
scholarship or stipend, unless excepting such
debt from discharge under this paragraph will
impose an undue hardship on the debtor and the
debtor's dependents;
Crime Control Act of 1990 Higher Education Amendments of 1998
vs.

16. Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005
Finally, 0n April 20, 2005, Congress amended 523(a)(8). With this amendment, Congress
again broadened the scope of loans covered under the subsection.
(a) A discharge under section 727 … of this title does not discharge an individual debtor
from any debt
(8) unless excepting such debt from discharge under this paragraph would impose an
undue hardship on the debtor and the debtor's dependents, for—
“(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a
governmental unit, or made under any program funded in whole or in part by a
governmental unit or nonprofit institution; or
“(ii) an obligation to repay funds received as an educational benefit, scholarship, or
stipend; or
“(B) any other educational loan that is a qualified education loan, as defined in section
221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an
individual;
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 105–244, § 971(a)

17. Comparing Amendments
(a) A discharge under section 727 … of this title does
not discharge an individual debtor from any debt
(8) for an educational benefit overpayment or loan
made insured, or guaranteed by a governmental unit,
or made under any program funded in whole or in part
by a governmental unit or a nonprofit institution, or for
an obligation to repay funds received as an educational
benefit, scholarship or stipend, unless excepting such
debt from discharge under this paragraph will impose
an undue hardship on the debtor and the debtor's
dependents;
(a) A discharge under section 727 … of this title does not
discharge an individual debtor from any debt
(8) unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor
and the debtor's dependents, for—
(A) (i) an educational benefit overpayment or loan made,
insured, or guaranteed by a governmental unit, or made
under any program funded in whole or in part by a
governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational
benefit, scholarship, or stipend; or
(B) any other educational loan that is a qualified education
loan, as defined in section 221(d)(1) of the Internal Revenue
Code of 1986, incurred by a debtor who is an individual;
Higher Education Amendments of 1998 BAPCPA 2005
vs.

18. Miscellaneous

19. Chapter 13 debtors & 523(a)(8)
On November 5, 1990, Congress passed the Omnibus Budget Reconciliation Act of 1990.
Until passing that Act, debtors who filed a chapter 13 — unlike debtors who filed a chapter
7 — could discharge their student loans without having to wait for time to pass or having
to show undue hardship.
Congress did away with that “loophole” by amending 11 USC § 1328(a)(2) to make
523(a)(8) applicable to chapter 13 debtors.
At first, Congress intended for this change to be temporary. We know this because
Congress added a sunset provision in the Act that made the amendment ineffective on
October 1, 1996.
Congress later repealed the sunset provision, however, as part of the Higher Education
Amendments of 1992. Now the dischargeability provision works the same whether a
debtor files a chapter 7 or a chapter 13.
Congress delayed the provision’s
effective date for two reasons. First, it
wanted the chance to review the GAO
study of the discharge of federally
backed student loans in bankruptcy.
Second,it wanted to reconsider the
propriety of the provision.
Pub. L. No. 101–508, §§ 3007, 3008
Pub. L. No. 102-325, § 1558

20. – End –