Departmental Guidance Regarding Student Loan Bankruptcy Litigation Page - 4 -
F.3d 775, 779 (8th Cir. 2009).
2
Both tests require assessment of the debtor’s income and
reasonable expenses to determine whether the debtor has the present and future ability to
maintain a “minimal standard of living” while making student loan payments. See, e.g., In re
Hurst, 553 B.R. 133, 137 (B.A.P. 8th Cir. 2017) (“[I]f the debtor’s reasonable financial resources
will sufficiently cover payment of the student loan debt—while still allowing for a minimal
standard of living—then the debt should not be discharged.”) (citing In re Jesperson, 571 F.3d at
779). Finally, both tests direct the court to review the debtor’s past efforts at repayment. In re
Polleys, 356 F.3d at 1309; see also In re Bronsdon, 435 B.R. 791, 797 (B.A.P. 1st Cir. 2010).
IV. Discussion of the Applicable Factors
As explained above, consideration of student loan debt discharge requires an evaluation
of a debtor’s present, future, and past financial circumstances. This Guidance offers a framework
for Department attorneys to apply each of these factors.
With respect to the first factor, the Guidance relies upon the Internal Revenue Service
Collection Financial Standards (the IRS Standards) to assess whether a debtor can presently
maintain a “minimal standard of living” if required to repay student loan debt. In particular, the
Department attorney is advised to use the IRS Standards to evaluate a debtor’s expenses, and
then to compare those expenses to the debtor’s income, to determine whether the debtor has a
present ability to pay the loan.
With respect to the second factor, the Guidance uses presumptions for determining
whether inability to repay is likely to persist in the future. The Guidance recognizes, however,
that even in the absence of such presumptions a debtor may be able to establish that their
inability to pay will continue in the future.
With respect to the third factor, the Guidance identifies certain objective criteria that
evidence a borrower’s good faith. In addition, the Guidance discusses how to evaluate a debtor’s
2
The Eighth Circuit has described the Totality Test as “less restrictive” than the Brunner
framework, In re Long, 322 F.3d at 554, but it has also recognized that the distinction between
the standards “may not be that significant.” Jesperson, 571 F.3d at 779 n.1, 782. See, e.g., In re
Long, 322 F.3d at 554-55 (“Simply put, if the debtor’s reasonable future financial resources will
sufficiently cover payment of the student loan debt—while still allowing for a minimal standard
of living—then the debt should not be discharged. Certainly, this determination will require a
special consideration of the debtor’s present employment and financial situation—including
assets, expenses, and earnings—along with the prospect of future changes—positive or
adverse—in the debtor’s financial position”); see also Jesperson, 571 F.3d at 782 (the totality
approach also requires consideration of “evidence of a less than good faith effort to repay . . .
student loan debts”). The Guidance does not supersede applicable case law in the circuits.
Department attorneys should advance the principles and goals described in this Guidance
consistent with that case law.