Pennsylvania Higher Education Assistance Agency v. Faish

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit

11-28-1995

Pennsylvania Higher Education Assistance Agency
v. Faish
Precedential or Non-Precedential:

Docket 95-7178

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 95-7178

IN RE: MARJORIE JO FAISH,

Debtor

PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY

v.

MARJORIE JO FAISH,

Appellant

On Appeal from the United States District Court
for the Middle District of Pennsylvania
D.C. No. 94-cv-01353

Submitted Pursuant to Third Circuit LAR 34.1(a)
October 19, 1995
BEFORE: SCIRICA, COWEN and ROTH
Circuit Judges

(Filed November 28, l995)

Marjorie Jo Faish
4237-D Williamsburg Drive
Harrisburg, PA 17109

Appellant Pro Se

K. Kevin Murphy
Pennsylvania Higher Education
Assistance Agency
1200 North 7th Street
Harrisburg, PA 17102

Counsel for Appellee
Pennsylvania Higher Education
Assistance Agency

1
 OPINION

COWEN, Circuit Judge.

In this case we must decide whether appellant Marjorie Jo

Faish is entitled to have her student-loan obligation discharged

in a Chapter 7 bankruptcy proceeding. If Faish can establish

that repayment of her student-loan debt would result in "undue

hardship" under § 523(a)(8)(B) of the Bankruptcy Code, she is

entitled to have her entire debt discharged. 11 U.S.C. §

523(a)(8)(B).

The Bankruptcy Court for the Middle District of

Pennsylvania, citing equitable considerations, held that Faish

need repay only $15,000.00, less than half of her loan

obligation. On appeal, the District Court for the Middle

District of Pennsylvania, applying a modified version of the

"undue hardship" test set forth in In re Johnson, 5 Bankr. Ct.
Dec. 532 (Bankr. E.D. Pa. 1979), reversed the bankruptcy court.

The district court held that because Faish had failed to

establish that the repayment of her entire student-loan

obligation would impose "undue hardship," no discharge was

appropriate here.

We must also decide what legal standard bankruptcy courts

within the Third Circuit will now apply when they consider

whether the facts presented give rise to "undue hardship," as

that term is to be construed under § 523(a)(8)(B). This area of

the law is presently in a state of considerable confusion, with

2
bankruptcy courts within our Circuit applying a broad range of

standards.1
For the reasons

stated herein, we adopt the standard for "undue hardship" set

forth by the Court of Appeals for the Second Circuit in Brunner

v. New York State Higher

Education Services Corp., 831 F.2d 395 (2d Cir. 1987) (per

curiam). Pursuant to this standard, although different from the

one applied by the district court below, we will affirm the

district court's order that Faish's student-loan debt must be

deemed nondischargeable in its entirety.
I.

Marjorie Jo Faish obtained a Master's Degree in Public

Health and Community Health Services Administration from the

University of Pittsburgh in 1989. To help defer the costs of her

education, Faish obtained $31,879.31 in guaranteed student loans

from the Pennsylvania Higher Education Assistance Agency

("PHEAA").

1
The Bankruptcy Court for the Western District of
Pennsylvania's recitation of the following bankruptcy court
decisions that have developed separate tests "to determine
whether the facts of a case constitute undue hardship" is
indicative of the current uncertainty. See In re Correll, 105
B.R. 302, 305 (Bankr. W.D. Pa. 1989) (citing Brunner v. New York
State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987) (per
curiam); In re Conner, 89 B.R. 744 (Bankr. N.D. Ill. 1988); In
re Bryant, 72 B.R. 913 (Bankr. E.D. Pa. 1987); In re Craig, 64
B.R. 854 (W.D. Pa. 1986); In re Johnson, 5 Bankr. Ct. Dec. 532
(Bankr. E.D. Pa. 1979)).

3
Under the terms of the loan agreements, Faish was required to

commence payments on her student-loan obligation on October 1,

1991.

On

September 27, 1993, Faish filed a Chapter 7 bankruptcy petition

with the Bankruptcy Court for the Middle District of

Pennsylvania. On the same day, Faish filed a complaint to

determine the dischargeability of her student loan debt to PHEAA.

A trial on the issue of dischargeability was conducted on

December 22, 1993.

On July 12, 1994, the bankruptcy court rendered its

decision, making the following factual findings. See In re

Faish, No. 93-01686, slip op. at 2-3 (Bankr. M.D. Pa. July 12,

1994). Faish has a job working for the Commonwealth of

Pennsylvania in the Department of Public Welfare, Bureau of

Financial Operations, as a budget analyst. She earns a yearly

gross salary of approximately $27,000.00. Faish does not own an

automobile and commutes to and from work by bus. She has been

unsuccessful in her pursuit of a higher-paying job.

Faish is thirty-years-old, unmarried and has an eleven-year-

old son. Faish does not receive any child support payments from

the father of her child. She is concerned about the quality of

the neighborhood and school district that she lives in and is now

saving money for an automobile and a new apartment in a better

area.

Faish suffers from Crohn's disease, a chronic condition

affecting the bowel. She also has back problems. The bankruptcy

4
court found, however, that although Faish's health problems are

"significant," they "are not interfering with her ability to

work." Id. at 5.

Faish's original principal debt to PHEAA amounted to

$31,879.31. From November 13, 1991, through June 2, 1993, Faish

repaid $4,629.92 of her loan obligation. As of September 1993,

Faish owed PHEAA $32,989.33. Id. at 2.

After setting forth these factual findings, the bankruptcy

court observed that "[o]ur district court has adopted the test

for undue hardship set forth in In re Johnson . . . . The Johnson

test divides the undue hardship inquiry test into three prongs:

a mechanical test, a good faith test, and a policy test." Id. at

4. Applying the first prong of the Johnson test, the bankruptcy

court concluded that "Faish has failed to establish a lack of a

financial ability to repay for the foreseeable future and

therefore fails the mechanical prong of the Johnson test." Id.

at 5.

Although the Johnson court expressly held that if a student-

loan debtor fails to satisfy the mechanical test, "discharge of

the student loan must be denied," Johnson, 5 Bankr. Ct. Dec. at
544, the bankruptcy court below went on to apply Johnson's good

faith and policy tests. As to the Johnson "good faith" test, the

bankruptcy court found that Faish had "established a sufficient

degree of good faith." Faish, No. 93-01686, slip op. at 6.

However, Faish failed the "policy test" because "avoidance of the

obligation was a significant consideration in the filing." Id.

5
 Even though Faish had failed the Johnson "undue hardship"

test, the bankruptcy court went outside the Johnson framework and

considered what it deemed to be equitable considerations. The

court cited a bankruptcy court decision from another

jurisdiction, Woyame v. Career Education & Management (In re

Woyame), 161 B.R. 198 (Bankr. N.D. Ohio 1993), as authority for

the proposition that bankruptcy courts have "some latitude in the

amount of the nondischargeability determination even where

individual prongs of the Johnson test are not met on their face."

Faish, No. 93-01686, slip op. at 7.

The bankruptcy court concluded that "[b]ased upon the

equities involved, Faish will be given partial relief." Id. at

8.2 The court observed that it was "especially influenced . . .

by Faish's need to support a young dependent, and her desire to

accumulate some savings in order to provide a better life for

him." Id. at 7-8. Accordingly, the bankruptcy court held that

"$15,000.00 of Faish's student loan debt will be deemed to be

nondischargeable, and the remainder of the obligation, including
2
The bankruptcy court reached this conclusion despite its
earlier findings that

Faish's current employment and income are good, as are her
future employment and income prospects. Although a payment
to PHEAA of nearly $300.00 impacts significantly upon
Faish's disposable income, it does not place her or her son
below the subsistence level. Indeed, Faish has managed to
incorporate a savings component into her expenses, which is
rare in my experience among debtors applying for
dischargeability based upon undue hardship. Additionally,
Faish's degree qualifies her for promotion and/or more
favorable employment.

In re Faish, No. 93-01686, slip op. at 5 (Bankr. M.D. Pa. July
12, 1994).

6
accrued and future interest, will be deemed to be dischargeable."

Id. at 8.

On February 21, 1995, the District Court for the Middle

District of Pennsylvania issued a memorandum opinion reversing

the bankruptcy court. The district court expressly rejected the

bankruptcy court's assumption that it was bound by Johnson.

Faish, No. 94-1353, slip op. at 4 n.2 (M.D. Pa. Feb. 21, 1995).

The district court noted, however, that while it "would not

rigidly confine itself to Johnson's tripartite analysis," it

would abide by Johnson's "general framework." Id. at 4.

The district court observed that it was "the bankruptcy

judge's step beyond Johnson which has given rise to PHEAA's

appeal." Id. at 6. The district court then reviewed the

propriety of the bankruptcy judge's consideration of equitable

factors not contemplated by Johnson's three-pronged inquiry. The

court stated in dictum that "the bankruptcy court must be

prepared to move beyond Johnson to the extent that the Johnson

analysis fails to capture scenarios requiring some form of

student debt relief to alleviate undue hardship." Id. at 7.

However, "the circumstances necessary to justify discharge must

be unusual, and the hardship faced in the event of full repayment

must be substantial." Id. Citing Faish's favorable employment
prospects, the court concluded that "the continued viability of

governmentally guaranteed student loans is simply incompatible

with discharging student debt on the instant facts." Id. at 7-8.

Accordingly, the district court ordered that "Faish's student

7
debt must be deemed nondischargeable in its entirety." Id. at 8.

This appeal followed.
II.

We have jurisdiction under 28 U.S.C. § 158(d). Our review

of the district court's interpretation of the Bankruptcy Code is

plenary. Leeper v. Pennsylvania Higher Educ. Assistance Agency,

49 F.3d 98, 100 (3d Cir. 1995); In re Pelkowski, 990 F.2d 737,

739 (3d Cir. 1993). The debtor has the burden of demonstrating

undue hardship. Woodcock v. Chemical Bank, NYSHESC (In re

Woodcock), 45 F.3d 363, 367 (10th Cir.), cert. denied, 64

U.S.L.W. 3241 (U.S. 1995); In re Roberson, 999 F.2d 1132, 1137

(7th Cir. 1993).
III.

Section 523(a)(8)(B) of the Bankruptcy Code provides as

follows:
(a) A discharge under section 727, 1141, 1228(a), 1228(b),
or 1328(b) 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
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 more than 7 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;

11 U.S.C. § 523(a)(8)(B) (emphasis added).

8
 Section 523(a)(8)(B) was passed as part of the Bankruptcy

Reform Act of 1978. As one commentator has explained, the "undue

hardship" exception of § 523(a)(8)(B)
is difficult to apply because the drafters of the Bankruptcy
Code did not define undue hardship. The drafters said that
bankruptcy courts must decide undue hardship on a case-by-
case basis, considering all of a debtor's circumstances.
Looking for guidance in the undue hardship cases, the
bankruptcy courts have shaped facts and circumstances tests
of undue hardship by relying on the legislative history of
section 523(a)(8).

Kurt Wiese, Note, Discharging Student Loans In Bankruptcy: The
Bankruptcy Court Tests of "Undue Hardship," 26 Ariz. L. Rev. 445,

447 (1984) (hereinafter Wiese, Undue Hardship).

Examining the Congressional Record in order to discern the

legislative purpose behind the enactment of § 523(a)(8)(B), we

observed in In re Pelkowski that "the debate in the main focused

on the twin goals of rescuing the student loan program from

fiscal doom and preventing abuse of the bankruptcy process by

undeserving debtors." Pelkowski, 990 F.2d at 743. Thus, the

Pelkowski court expressed agreement with the conclusion of the
Court of Appeals for the Sixth Circuit that "Congress enacted 11

U.S.C. § 523(a)(8) in an effort to prevent abuses in and protect

the solvency of educational loan programs." Id. (quoting In re

Merchant, 958 F.2d 738, 742 (6th Cir. 1992)).

The Pelkowski court held that "[t]he Congressional intent to

eliminate debtor abuse of the educational loan program would

apply both to single makers of loan notes and to co-makers,

whether students or their parents or other co-signers, as all may

abuse the bankruptcy system or take advantage of legal

9
loopholes." Pelkowski, 990 F.2d at 744. The court concluded that

"Congress has revealed an intent to limit the dischargeability of

educational loan debt, and we can construe the provision no more

narrowly than the language and the legislative history allow."

Id. at 745. See Darrell Dunham & Ronald A. Buch, Educational

Debts Under the Bankruptcy Code, 22 Mem. St. L. Rev. 679, 702

(1992) (hereinafter Dunham & Buch, Educational Debts) ("Congress

clearly intended that most educational debt still due within

seven years of graduation should be nondischargeable.").
IV.

A.

Before we address the merits of Faish's petition, we must

decide which of the several "undue hardship" tests should be

applied in the present matter. As one commentator has explained,

"[b]ankruptcy courts use a wide variety of tests to determine

whether the debtor has demonstrated undue hardship. While these

tests have received varying degrees of acceptance, no particular

test authoritatively guides or governs the undue hardship

determination." Thad Collins, Note, Forging a Middle Ground:

Revision of Student Loan Debts in Bankruptcy as an Impetus to

Amend 11 U.S.C. § 523(a)(8), 75 Iowa L. Rev. 733, 744 (1990).

Due to this lack of a "unified approach to undue hardship,

litigants are in the difficult position of not knowing which

standard will govern their case. Consequently, effective

presentation of evidence on undue hardship is made difficult

unless the jurisdiction has definitively and unequivocally

10
adopted one test and a consistent set of determinative factors."

Id. at 747. It is to this task that we now turn.

The three most prominent tests applied to determine whether

the "undue hardship" exception of § 523(a)(8)(B) should be

invoked are the Johnson test, the Bryant test and the Brunner

test. The Johnson and Bryant tests have been described as "the

two most prominent tests" bankruptcy courts have applied to

decide whether the "undue hardship" exception should apply.

Dunham & Buch, Educational Debts, supra, at 695. The Brunner

test has been adopted by a majority of the Courts of Appeals that

have specifically addressed the issue of what single standard

should be applied to determine whether "undue hardship" exists

under 11 U.S.C. § 523(a)(8)(B). See Brunner, 831 F.2d at 395

(setting forth the Brunner test); In re Roberson, 999 F.2d 1132

(7th Cir. 1993) (adopting the Brunner test); see also Cheesman

v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d

356 (6th Cir. 1994), cert. denied, 115 S. Ct. 731 (1995)

(applying the Brunner test). We will now discuss in detail the

content and respective merits of these three "undue hardship"

standards.
1. The Johnson Test

The tripartite Johnson test was set forth by the Bankruptcy

Court for the Eastern District of Pennsylvania in In re Johnson,

5 Bankr. Ct. Dec. at 532. The Johnson test provides as follows:
In determining whether the undue hardship exception entitles
a specific debtor to discharge of his student loan, a court
should rely on three tests:
(1) Mechanical Test: The court must ask: Will the
debtor's future financial resources for the longest

11
 foreseeable period of time allowed for repayment of the
loan, be sufficient to support the debtor and his dependents
at a subsistence or poverty standard of living, as well as
to fund repayment of the student loan? If the question is
answered affirmatively, discharge of the student loan must
be denied. If answered negatively, then the court must apply
the good faith test:
(2) Good Faith Test: Here, the court asks two
questions:

(a) Was the debtor negligent or irresponsible in his
efforts to minimize expenses, maximize resources, or secure
employment?
(b) If "yes," then would lack of such negligence or
irresponsibility have altered the answer to the mechanical
test?

If the answer to the first part of the good faith test
is no, then the debtor should be discharged of the
obligation to repay his student loan. However, if the
answers to both parts of the good faith test are "yes," then
a presumption against discharge is established--which may be
rebutted by a negative answer to the third and final test.
(3) . . . Policy Test: The court must ask: Do the
circumstances--i.e., the amount and percentage of total
indebtedness of the student loan and the employment
prospects of the petitioner indicate:

(a) That the dominant purpose of the bankruptcy
petition was to discharge the student debt, or
(b) That the debtor has definitely benefitted
financially from the education which the loan helped to
finance?

If the answer to both parts of this question is a firm
"no," then the debtor should be discharged from his student
loan obligation. If the court answers "yes" to either part
of the question, then discharge should be denied.

Id. at 544.

Johnson's tripartite analysis appears to be both

unnecessarily complicated and unduly cumbersome. When Johnson is

applied correctly, however, most petitions will be denied after

the mechanical test is applied. Thus, in this sense, the Johnson

test is in accord with our recognition of the Congressional

12
objectives of preventing abuse of the bankruptcy process and

protecting the financial integrity of the student loan program.

Pelkowski, 990 F.2d at 743-44. Similarly, both the good faith

and policy tests provide additional protection against abuse of

the student loan program. The Johnson test, by its terms,

contains no provision that would permit bankruptcy courts to

negate a finding of nondischargeability based upon an assessment

of other "equitable considerations" that may be deemed to be

relevant.
2. The Bryant Test

The Bryant test was set forth by the Bankruptcy Court for

the Eastern District of Pennsylvania eight years after Johnson

was decided. In re Bryant, 72 B.R. 913 (Bankr. E.D. Pa. 1987).

The Bryant court criticized the three-part Johnson test as

"unfortunately complicated" and promulgated an alternative test

for "undue hardship." Id. at 915 n.2. The Bryant court

explained its standard in the following terms:
The test which we propose strives to place the element of
objectivity into the process of decision-making in this
area. We propose, as a starting position, to analyze the
income and resources of the debtor and his dependents in
relation to federal poverty guidelines established by the
United States Bureau of the Census and determine the
dischargeability of the student loan obligation on the basis
of whether the debtor's income is substantially over the
amounts set forth in those guidelines or not. If not, a
discharge will result only if the debtor can establish
"unique" and "extraordinary" circumstances which should
nevertheless render the debt dischargeable. If the debtor's
income is below or close to the guideline, the lender can
prevail only by establishing that circumstances exist which
render these guidelines unrealistic, such as the debtor's
failure to maximize his resources or clear prospects of the
debtor for future income increases. We feel that such a
test will decrease, if not eliminate the resort to the

13
 unbridled subjectivity which seems to pervade many of the
decisions in this area.

Id. at 915. Elaborating upon its new "undue hardship" exception

standard, the bankruptcy court observed that "[w]e find ourselves

in disagreement with those courts which have denied discharges of

student loans on the basis of whether any given expenses are

justified, as these represent subjective value judgments

concerning which we consider ourselves no better able to gauge

than, generally, debtors themselves." Id. at 918.

We expressly reject and depart from this reasoning and

analysis. The Bryant test's refusal (or at least extreme

reluctance) to question whether certain expenses debtors have

incurred can be justified seems inconsistent with Congress' dual

legislative goals of "eliminat[ing] debtor abuse of the

educational loan program" and "preserv[ing] the fiscal integrity

of the student loan program." Pelkowski, 990 F.2d at 744. The

Bryant test does not adequately account for the fact that one of

the most common reasons student-loan debtors find themselves in
bankruptcy court is that their "subjective value judgments" are

often (but not always) indicative of a spendthrift philosophy

which a bankruptcy court should be competent to consider before

discharging their student loans.

The Bryant court also expressed disagreement with the first

inquiry of the Johnson "policy test," which asks if "the dominant

purpose of the bankruptcy petition was to discharge the student

debt." Johnson, 5 Bankr. Ct. Dec. at 544. The Bryant court

declared that since "avoiding the consequences of debts is

14
normally the reason for filing for bankruptcy . . . the fact that

the Debtor seeks to discharge almost exclusively student loan

obligations . . . should be irrelevant." Bryant, 72 B.R. at 915

n.2. We disagree. The purpose behind the debtor's bankruptcy

petition is not irrelevant in this context because one of the

reasons that Congress enacted § 523(a)(8)(B) was in response to

"reports of students discharging student loan debts after

graduation and subsequently accepting high-paying jobs." Wiese,

Undue Hardship, supra, at 446. See Brunner, 831 F.2d at 396

(Congress intended "to make the discharge of student loans more

difficult than that of other nonexcepted debt."). For these

reasons, we decline to adopt the Bryant test.
3. The Brunner Test

As the Court of Appeals for the Second Circuit has observed,

before Brunner was decided there was "very little appellate

authority on the definition of `undue hardship' in the context of

11 U.S.C. § 523(a)(8)(B)." Brunner, 831 F.2d at 396. Relying

upon the reasoning of the district court below,3 the Brunner

court set forth the following three-part test for the "undue

hardship" exception:
(1) that the debtor cannot maintain, based on current
income and expenses, a "minimal" standard of living for
herself and her dependents if forced to repay the loans;
(2) that additional circumstances exist indicating that this
state of affairs is likely to persist for a significant
portion of the repayment period for student loans; and (3)
that the debtor has made good faith efforts to repay the
loans.

3
See 46 B.R. 752 (Bankr. S.D.N.Y. 1985), aff'd, 831 F.2d at
395.

15
Id.

The Court of Appeals for the Seventh Circuit formally

adopted the Brunner test in In re Roberson, 999 F.2d at 1132. In

Roberson, both the bankruptcy court and the district court below

had applied the three-part Johnson test. After expressly

rejecting the Johnson test and giving the Brunner test its

imprimatur, the Seventh Circuit described how the Brunner test

should properly be applied.

The Roberson court observed that "[t]he first prong of

Brunner requires an examination of the debtor's current financial

condition to see if payment of the loans would cause his standard

of living to fall below that minimally necessary." Id. at 1135.

The court admonished that the other prongs of the Brunner test

should not be examined if the first prong has not been satisfied.

Id.

The second prong of the Brunner test requires "that

additional circumstances exist indicating that this state of

affairs is likely to persist for a significant portion of the

repayment period of the student loans." Brunner, 831 F.2d at

396. The Roberson court observed that this requirement "properly
recognizes the potential continuing benefit of an education, and

imputes to the meaning of `undue hardship' a requirement that the

debtor show his dire financial condition is likely to exist for a

significant portion of the repayment period." Roberson, 999 F.2d

at 1135.

The third prong of the Brunner test is the good faith

inquiry. The Roberson court noted that the question of good faith

16
should only be reached if the debtor has satisfied the first two

elements. See id. at 1136. The good faith inquiry is to be

guided by the understanding that "undue hardship encompasses a

notion that the debtor may not willfully or negligently cause his

own default, but rather his condition must result from `factors

beyond his reasonable control.'" Id. (quoting Comm'n on the

Bankruptcy Laws of the United States, Report, [H.R. Doc. No. 137,

93d Congress, 1st Sess., Pt. II], at 140 n.16).

The Roberson court rejected the second prong of the Johnson

"policy test," which considers "whether the debtor `has

definitely benefitted financially from the education which the

loan helped to finance.'" Id. at 1136 (quoting Johnson, 5 Bankr.

Ct. Dec. at 544). The court observed that "[s]uch an inquiry

conflicts with the basic concept of government-backed student

loans." Roberson, 999 F.2d at 1136.

The Seventh Circuit cited the Southern District of New

York's statement in Brunner that federal student loan programs

were not designed to "turn[] the government into an insurer of

educational value." Id. (quoting Brunner, 46 B.R. 752, 756 n.3

(S.D.N.Y. 1985)). Students who benefit from guaranteed loan

programs normally "would not be eligible to receive any financing

or only financing at a higher rate of interest . . . ."

Roberson, 999 F.2d at 1136. Since "[t]he decision of whether or

not to borrow for a college education lies with the individual,"

it is "the student, not the taxpayers, [that] must accept the

consequences of the decision to borrow." Id. at 1137.

17
 We agree with the Seventh Circuit's analysis and we offer

another criticism of the Johnson test. Johnson is needlessly

verbose and multifaceted. Its multiple tests and the subsidiary

questions required to be answered thereunder do not provide the

required clear statement of what the law is. For these reasons,

we decline to adopt the Johnson "undue hardship" test as the law

of this Circuit.
B.

Of the three tests that we have considered, Brunner is the

most consistent with the scheme that Congress established in

1978. The Brunner standard meets the practical needs of the

debtor by not requiring that he or she live in abject poverty for

up to seven years before a student loan may be discharged. On

the other hand, the Brunner standard safeguards the financial

integrity of the student loan program by not permitting debtors

who have obtained the substantial benefits of an education funded

by taxpayer dollars to dismiss their obligation merely because

repayment of the borrowed funds would require some major personal

and financial sacrifices.

The Brunner test is the most logical and workable of the
established tests. Analysis under Brunner is not hampered either

by the flawed Johnson "policy test" or the unwarranted deference

with which the Bryant test reviews the personal spending habits

of student-loan debtors. Brunner's concise formulation is both

easier to follow and to apply than Johnson's. We therefore hold

that the Brunner "undue hardship" test must now be applied by
bankruptcy courts within the Third Circuit.

18
 V.

Brunner now provides the definitive, exclusive authority

that bankruptcy courts must utilize to determine whether the

"undue hardship" exception applies. Student-loan debtors have

the burden of establishing each element of the Brunner test. All

three elements must be satisfied individually before a discharge

can be granted. If one of the requirements of the Brunner test

is not met, the bankruptcy court's inquiry must end there, with a

finding of no dischargeability. See id. at 1135. Equitable

concerns or other extraneous factors not contemplated by the

Brunner framework may not be imported into the court's analysis

to support a finding of dischargeability. See Norwest Bank

Worthington v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 969

(1988) ("whatever equitable powers remain in the bankruptcy

courts can only be exercised within the confines of the

Bankruptcy Code").

Applying the factual findings of the bankruptcy court below,

we now must determine whether Faish has satisfied her burden of

establishing that repayment of her student-loan obligation would

impose an "undue hardship" upon her.4 Applying the first prong

of the Brunner test, we must determine whether Faish "cannot
maintain, based on current income and expenses, a `minimal'

standard of living for herself and her dependents if forced to

repay the loans." Brunner, 831 F.2d at 396.

4
We conclude that sufficient facts appear in the record to
enable us to perform the Brunner analysis. Remand, therefore, is
unnecessary.

19
 The bankruptcy court found that Faish was employed by the

Commonwealth of Pennsylvania, Department of Public Welfare,

Bureau of Financial Operations, as a budget analyst at the time

of trial. She earned a gross yearly salary of $27,000.00 in 1993.

The court found that "Faish's current employment and income were

good," and that while "a payment to PHEAA of nearly $300.00

[per month] impacts significantly upon Faish's disposable income,

it does not place her or her son below the subsistence level."

Faish, No. 93-01686, slip op. at 5.

The first prong of the Brunner analysis requires more than a

showing of tight finances. Faish has failed to establish through

evidence presented at trial that, based upon her current income

and expenses, she could not maintain a minimal standard of living

if forced to repay her loans. Therefore, we conclude that Faish

has failed to satisfy the first element of the Brunner test.

Accordingly, we need not decide whether she would have satisfied

the second and third elements of our new standard. We therefore

hold that Faish's entire student-loan obligation is

nondischargeable.

Although Faish has a steady job, she argues that her

inability to find a job in her chosen field militates in favor of

discharge. In response to a similar claim, the Southern District

of New York in Brunner denied a discharge in bankruptcy to a
student-loan debtor who was far less fortunate than Faish. The

student-loan debtor in Brunner entered college in 1972. She

received a "Bachelor's degree in Psychology in 1979 and a

Master's degree in social work in 1982." Brunner, 46 B.R. at

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756. Appellee Marie Brunner "testified that she had sent out

`over a hundred' resumes in search of employment in her chosen

field." Id. at 757. Nonetheless, upon graduation Brunner was

unable to find work and at the time of her hearing she had been

supporting herself on public assistance for a period of four

months. Id. In the decade prior to her bankruptcy hearing,

Brunner's "greatest annual income was $9,000." Id. at 756.

Despite Brunner's inability to find work, the district court

held that she had failed to satisfy the first prong of the

Brunner test, which the court itself had just articulated. The

district court observed that Brunner
appears to be a woman who is unlikely to find a job in her
chosen field of work in the near future. However, she is an
apparently healthy, presumably intelligent, and well-
educated woman. Although she claimed to be unable to find
any other type of work, the evidence presented at the
hearing is too thin to support a finding that her chances of
finding any work at all are slim . . . . She has no
dependents or any other extraordinary burdens which would
impair her finding other work, or, once it is found, make it
unlikely that she can both support herself and pay off her
student loans.

In short, appellee at most proved that she is
currently--or was at the time of the hearing--unable both to
meet her minimal expenses and pay off her loans. This alone
cannot support a finding that the failure to discharge her
loans will impose undue hardship. (citations omitted).
Nothing in the record supports a finding that it is likely
that her current inability to find any work will extend for
a significant part of the repayment period of the loan or
that she has "a total incapacity now and in the future to
pay [her] debts for reasons not within [her] control."
(quoting In re Rappaport, 16 B.R. 615, 617 (Bankr. D.N.J.
1981)).

Id. at 757-58.

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 Today we adopt the reasoning of the Second Circuit. A

comparison of the facts in Brunner and Faish is telling. The

financial straits of the bankruptcy petitioner in Brunner appear

to have been far more serious than any short-term, belt-

tightening that may be required of Faish in order to repay her

student-loan obligation.

Faish does not satisfy the standard that we set forth today.

Moreover, full nondischargeability is especially appropriate here

because, in essence, Faish was asking the bankruptcy court to

allow a discharge of her student-loan obligation so that she

could devote the money (which could otherwise have been earmarked

for student loan payments) to savings for the purchase of a new

car and to settle into a new apartment. Cf. Matthews v. Pineo,

19 F.3d 121, 124 (3d Cir.), cert. denied, 115 S. Ct. 82 (1994)

(NHSC scholarship recipient's "current income and . . . expenses

should [not] be regarded as unalterable. Instead, the proper

inquiry is whether it would be `unconscionable' to require [the

debtor] to take any available steps to earn more income or to

reduce her expenses.").
VI. CONCLUSION

For the foregoing reasons, we adopt the Brunner "undue

hardship" standard to determine whether student-loan debt can be

discharged pursuant to 11 U.S.C. § 523(a)(8)(B). We further hold

that Faish has failed to satisfy her burden to establish undue

hardship under the Brunner standard and that her entire student-

loan obligation is nondischargeable. The judgment of the

district court will be affirmed.

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