1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-16-1995

In Re: Stanton L. Segal

Precedential or Non-Precedential:

Docket 94-1222

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Recommended Citation

"In Re: Stanton L. Segal" (1995). 1995 Decisions. Paper 168.

http://digitalcommons.law.villanova.edu/thirdcircuit_1995/168
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 No. 94-1222 

 ___________ 

 IN RE: STANTON L. SEGAL, 

 Debtor 

 ELIZABETH CROWE SEGAL, 

 Debtor 

 SANTA FE MEDICAL SERVICES, INC., 

 Appellant, 

 vs. 

 STANTON L. SEGAL; ELIZABETH CROWE SEGAL, 

 Appellees, 

 CHRISTINE C. SHUBERT, ESQ., 

 Trustee 

 FREDERIC BAKER, ESQ., 

 Trustee 

 ___________ 

 APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

 (D.C. Civil No. 93-cv-06460) 

 ___________ 

 ARGUED JULY 20, 1994 

 BEFORE: SCIRICA, LEWIS and SEITZ, Circuit Judges. 
 (Filed June 16 , 1995) 

 ___________ 

Kenneth F. Carobus (ARGUED) 

Morris, Adelman, Dickman & Carpel 

1920 Chestnut Street, Suite 400 

Post Office Box 30477 

Philadelphia, PA 19103-8477 

 Attorney for Appellant

Andrew N. Schwartz 

David C. Silverman (ARGUED) 

Shaiman, Phelan & Schwartz 

1411 Walnut Street, Suite 1015 

Philadelphia, PA 19102 

 Attorneys for Appellees

 ___________ 

 OPINION OF THE COURT 

 ___________ 

LEWIS, Circuit Judge. 

 This appeal requires us to determine whether loans made 

pursuant to the terms of an employment contract, and which are 

used to repay educational debt, are non-dischargeable within the 

meaning of 11 U.S.C. § 523(a)(8). The Bankruptcy Court concluded 

that they are dischargeable. Because we do not believe that such 

loans are educational in nature and are therefore not subject to 

the non-dischargeability exception set forth in section 

523(a)(8), we will affirm. 

I. 

 On June 20, 1978, Appellee Dr. Elizabeth Crowe Segal 

("Dr. Crowe") signed a Scholarship Program Contract ("Scholarship 
Contract") with the National Health Service Corps ("NHSC"), which 

allowed her to receive educational benefits from, and caused her 

to incur an obligation to, the NHSC.1 Under the terms of the 

contract, Dr. Crowe received medical school tuition support and 

various stipends during the course of her studies, which she 

completed in 1982. Also in 1982, Dr. Crowe married Appellee Dr. 

Stanton Segal ("Dr. Segal") who was at no time a party to, nor 

obligated under, the Scholarship Contract.2

 Pursuant to the Scholarship Contract, Dr. Crowe became 

obligated, upon her graduation from medical school, to provide 

medical services for approximately four years at a location 

designated by the NHSC. She apparently received a deferment to 

begin service immediately after completing a residency, and she 

began practicing at an approved NHSC site in Jasper, Florida, in 

July 1986. Dr. Crowe worked at the Jasper site until April 1989, 

thereby satisfying all but approximately 19 months of her 

four-year obligation to NHSC. At that time, Dr. Crowe elected to 

satisfy the remaining obligation under the Scholarship Program by 

way of repayment. (The Scholarship Contract provided that in 

lieu of services, a cash payment could be made to satisfy the 

obligation. See 42 U.S.C. § 254o.) The means by which Dr. Crowe 

 

1. Section 751 of the Public Health Service Act (42 U.S.C. 

§ 294t) established the National Health Service Corps Scholarship 

Program and authorized the Secretary of Health, Education and 

Welfare to provide applicants selected to be participants in the 

program with scholarship awards. 

2. For ease of reference and where appropriate, we will 

occasionally refer to Dr. Crowe and Dr. Segal as the "debtors." 
obtained the funds to satisfy her obligation to the NHSC, 

detailed below, give rise to the controversy over the scope of 

section 523(a)(8). 

 During the time that Dr. Crowe was practicing in 

Jasper, Dr. Segal became affiliated with Lake Shore Hospital in 

Lake City, Florida. Lake Shore Hospital is owned by Santa Fe 

HealthCare, Inc. ("HealthCare"), which also owns Appellant Santa 

Fe Medical Services ("Santa Fe"), a Gainesville, Florida, 

nonprofit corporation. HealthCare was recruiting physicians to 

provide Obstetrics and Gynecological ("OB\GYN") services in the 

area surrounding Lake Shore Hospital. Dr. Crowe was both willing 

and able to provide these medical services, but she first had to 

satisfy her obligation to the NHSC. After some negotiation, Dr. 

Crowe and Santa Fe, by and through its principal, HealthCare, 

entered into a Physician Employment Contract ("Employment 

Contract"), the terms of which included a loan from Santa Fe to 

Dr. Crowe. Section 7 of the Employment Contract provides, in 

pertinent part: 

 (a) In addition to [Dr. Crowe's] salary, 

SantaFe shall loan [Dr. Crowe] up to Two 

Hundred Thousand dollars ($200,000) upon the 

execution of this Agreement by the Physician 

and upon the execution of the attached 

promissory note by the Physician and her 

husband. Said amount shall be used solely 

and exclusively to satisfy the Physician's 

obligation to the United States National 

Health Service. 

 The promissory note referred to in Section 7 of the 

Employment Contract states at the outset: 

 For value received, we Betsy Crowe, M.D., and 

Stanton Segal, M.D. (collectively referred to 
as "the Maker") promise to pay to the order 

of SantaFe Medical Services, Inc. ("Payee") 

the sum of Two Hundred Thousand dollars 

($200,000.00) in the following manner: in 

thirty-six equal monthly payments of then 

outstanding principal each, beginning May 15, 

1991, and due on the first day of each month 

thereafter until the entire amount is paid, 

with interest on the unpaid balance at the 

prime rate . . . . 

 In accordance with the provisions of the Employment 

Contract, Santa Fe loaned the Debtors $182,619.17, an amount 

which corresponds to the precise figure owed by Dr. Crowe to the 

NHSC.3 On October 31, 1989, Santa Fe issued a check for that 

amount made payable to the Debtors and the Health Resources and 

Services Administration, a division of the then Department of 

Health, Education, and Welfare.4 The Debtors do not dispute that 

they received this amount, nor is there any suggestion that the 

funds were not paid to the NHSC. 

II. 

 It is likewise undisputed that by April 29, 1992, the 

date upon which Drs. Crowe and Segal filed a petition for 

bankruptcy relief under Chapter 7, they had repaid only $5,000 to 

Santa Fe. 

 Santa Fe filed a Complaint to Determine 

Dischargeability in the United States Bankruptcy Court for the 

 

3. Although the promissory note indicates that the amount owed 

was $200,000, it is undisputed that the actual amount of the debt 

was $182,619.17. 

4. The Department of Health, Education and Welfare was 

redesignated the Department of Health and Human Services in 1979. 

Pub. L. 96-88, Title V, § 509(b), Oct. 17, 1979, 93 Stat. 695. 
Eastern District of Pennsylvania seeking a declaration that the 

loan it made to Dr. Crowe and Dr. Segal in 1989 was nondischargeable under section 523(a)(8). After discovery was 

completed, the Debtors filed a motion for summary judgment 

requesting a dismissal of the adversary action with respect to 

Dr. Segal because (1) he was not the student-debtor and had, 

therefore, received no educational benefits and (2) the loan 

itself was not the type of loan covered by section 523(a)(8). 

Upon the court's suggestion that a determination of the second 

issue in the Debtors' favor, i.e., that the loan was not an 

educational loan, would resolve the claim against Dr. Crowe as 

well, the motion was amended and brought on behalf of both 

debtors. Prior to the court's ruling on the motion and Santa 

Fe's cross-motion which followed, we decided In re Pelkowski, 990 

F.2d 737 (3d Cir. 1993), wherein we definitively resolved the 

issue whether a non-student co-obligor may discharge a debt under 

section 523(a)(8), without proving one of the statutory 

exceptions, in favor of the creditor.5

 

5. There are two statutory exceptions to the nondischargeability of a student loan which remain available to both 

the student and non-student debtor, i.e., that the loan came due 

more than seven years before the bankruptcy filing, 11 U.S.C. 

§ 523(a)(8)(A), or that non-discharge of the debt would create 

"undue hardship," 11 U.S.C § 523(a)(8)(B). In re Pelkowski, 990 

F.2d 737, 742 (3d Cir. 1993). The Debtors, however, do not 

assert the applicability of either exception in this proceeding. 
 The bankruptcy court found the debt dischargeable.6 

Santa Fe appealed and the United States District Court for the 

Eastern District of Pennsylvania affirmed. This appeal followed. 

We have jurisdiction pursuant to 28 U.S.C. § 1291 and 28 U.S.C. 

§ 158(d). 

 Our review of the district court's decision 

"effectively amounts to review of the bankruptcy court's opinion 

in the first instance." In re Roth American, Inc., 975 F.2d 949, 

952 (3d Cir. 1992), quoting In re Sharon Steel Corp., 871 F.2d 

1217, 1222 (3d Cir. 1989). Insofar as this case turns on the 

interpretation of a provision of the Bankruptcy Code, our review 

is plenary. Pelkowski, 990 F.2d at 739. We review de novo the 

bankruptcy court's order granting summary judgment. In re 

Pilcher, 149 B.R. 595 (9th BAP 1993). 

III. 

 The question before us is one of statutory 

construction. Accordingly, we begin with the familiar canon that 

the starting point for interpreting a statute is its plain 

language, Mansell v. Mansell, 490 U.S. 581, 588 (1989), although 

 

6. The bankruptcy court elected not to determine the 

dischargeability of the debt as to Dr. Segal because its 

determination that the Santa Fe loan did not represent an 

educational debt within in the meaning of section 523(a)(8) 

proved to be dispositive. Appellees argue that the circumstances 

of this case, i.e., the nature of the loan and the timing of Dr. 

Segal's co-execution, distinguish it from Pelkowski and that a 

remand for further argument on the issue of dischargeability with 

respect to Dr. Segal as co-obligor would be proper in the event 

we decide section 523(a)(8) does not apply to the loan. Because 

we will affirm the district court's determination that the loan 

is dischargeable under section 523(a)(8), this issue is moot. 
we hasten to note that in certain instances "plain language" can 

be an oxymoron. We have previously determined that where "the 

terms of a statute [are] unambiguous, judicial inquiry is 

complete except in rare circumstances." Taylor v. Freeland & 

Kronz, 938 F.2d 420, 424 (3d Cir. 1991), aff'd, 503 U.S. 638 

(1992), quoting Demarest v. Manspeaker, 498 U.S. 184, 190 (1991). 

Such circumstances are present only in the "rare" case where the 

"literal application of the statute will produce a result 

demonstrably at odds with the intentions of its drafters[,]" id., 

quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 

235, 242 (1989), or where the result would be "so bizarre that 

Congress 'could not have intended' it." Id., quoting Demarest, 

498 U.S. at 191. 

 Title 11 of the United States Code, at section 

523(a)(8), provides: 

 (a) A discharge under section 727, 1141 or 

1128(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 

. . . 

11 U.S.C. § 523(a)(8) (1990). 

 Despite our recent conclusion that the language of 

section 523(a)(8) was unambiguous and that resort to legislative 
history was, therefore, unnecessary, see Pelkowski, 990 F.2d at 

741-42, an analysis of the issues presented in this case cannot 

avoid some discussion of the evolution of section 523(a)(8). 

IV. 

 The Bankruptcy Code was drafted to provide a discharge 

procedure that enables insolvent Debtors to reorder their affairs 

and enjoy "a new opportunity in life with a clear field for 

future effort, unhampered by the pressure and discouragement of 

preexisting debt." Grogan v. Garner, 498 U.S. 279, 286 (1991), 

quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). But 

Congress elected to exclude certain obligations from the general 

policy of discharge where the public policy at issue outweighs 

the debtors need for a fresh start. See Pelkowski, 990 F.2d at 

744-45; In re Merchant, 958 F.2d 738, 740 (6th Cir. 1992). Among 

the exceptions, which are to be narrowly construed against the 

creditor and in favor of the debtor, Pelkowski, 990 F.2d at 744, 

is the proviso in section 523(a)(8) that educational loans be 

non-dischargeable. 

 When originally enacted in 1978, section 523(a)(8) 

referred only to obligations "to a governmental unit, or a 

nonprofit institution of higher education for an educational 

loan." Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 

92 Stat. 2549 (1978). Clearly under that version of the statute, 

the debt to Santa Fe would be dischargeable, regardless of its 

classification as an educational loan. Santa Fe is neither a 

governmental unit nor a nonprofit institution of higher 

education. 
 The subsection was amended in 1979 to include 

"educational loan[s] 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." Act of August 14, 1979, Pub. L. No. 96-56, 

§ 3(1), 93 Stat. 387 (1979) (amending 11 U.S.C. § 523(a)(8) 

(Supp. 1979)). The debt at issue in this case still would have 

been dischargeable, as the loan by Santa Fe was not made, insured 

or guaranteed by a governmental entity. 

 Section 523(a)(8) was again expanded by section 

454(a)(2) of the Bankruptcy Amendment Act of 1984, wherein the 

clause "of higher education" was deleted to eliminate the 

inference that the section applied only to nonprofit institutions 

associated with higher education. Bankruptcy Amendments and 

Federal Judgeship Act of 1984, Pub. L. No. 98-353, Title III, 

§ 454(a)(2), 98 Stat. 333 (Supp. 1984) (amending 11 U.S.C. 

§ 523(a)(8) (1982)). As a result of the 1979 and 1984 

amendments, educational loans made by commercial, for-profit 

institutions were non-dischargeable if they were insured or 

guaranteed by a governmental entity, or if the loans were made 

pursuant to an educational lending program involving a nonprofit 

institution. See In re Merchant, 958 F.2d 738 (6th Cir. 1992) 

(loan made by commercial bank was assigned to a nonprofit 

university pursuant to an agreement by the university to purchase 

all defaulted student loans); In re Pilcher, 149 B.R. 595 (9th 

B.A.P. 1993) (nonprofit entities, while not involved in the 

debtor's particular loan, were involved in the program by which 
the loan was made). Likewise, educational loans made by 

nonprofit institutions became dischargeable if they were made as 

part of an educational loan program. In re Roberts, 149 B.R. 547 

(C.D. Ill. 1993) (educational loan by a nonprofit credit union 

pursuant to an established educational loan program held to be 

non-dischargeable). 

 Subsection 523(a)(8) was yet again expanded by the 

Crime Control Act of 1990.7 The revised statute made 

non-dischargeable educational benefits and overpayments as well 

as educational loans, and increased from five to seven years the 

time interval in section 523(a)(8). Most relevant to this case, 

however, was the addition of language which prohibited the 

discharge of "an obligation to repay funds received as an 

educational benefit, scholarship, or stipend." Crime Control Act 

of 1990, Pub. L. No. 101-647, § 3631(a), 104 Stat. 4865 (1990) 

(amending 11 U.S.C. § 523(a)(8) (1984)). As discussed below, 

Santa Fe suggests that the debt here represents such an 

obligation. 

 

7. The effective date of these amendments was 180 days from 

November 29, 1990, the date of enactment. Crime Control Act of 

1990, Pub. L. No. 101-647, §§ 3621, 3631, 104 Stat. 4789, 

4964-4965, 4966 (1990). Because this case was filed in April 

1992, the amendments are applicable. 
V. 

 Santa Fe raises two contentions in its effort to 

persuade us that the Debtors' loan obligation is nondischargeable under section 523(a)(8). 

A. 

 Santa Fe initially claims that the obligation 

represents a debt for an "educational benefit overpayment or loan 

. . . made under any program funded in whole or in part by a 

governmental unit or nonprofit institution," focussing almost 

exclusively on whether the loan to Dr. Crowe in 1989 was made 

"under any program." 

 For this argument to prevail, Santa Fe would first have 

to establish that the loan to Dr. Crowe was for "educational 

purposes." In re Shipman, 33 B.R. 80 (Bankr. W.D. Mo. 1983). 

But even if we were to assume, as the bankruptcy court did, that 

the loan from Santa Fe to Dr. Crowe was an educational loan, our 

analysis would not end there. Under both the former and present 

versions of section 523(a)(8), it is insufficient for purposes of 

establishing non-dischargeability that a nonprofit institution 

make an educational loan; instead, the loan must also have been 

made pursuant to some program. See Pub. L. Nos. 96-56, § 3(1), 

93 Stat. 387 (1979); 98-353, § 454(a)(2), 98 Stat. 333 (Supp. 

1984); and 101-647, § 3631(a), 104 Stat. 4865 (1990). Although 

Santa Fe now claims that it and the Debtors created a program 

that was carefully outlined in the Employment Contract and the 

promissory note, that is not enough, for the record is devoid of 

evidence that the loan was made under any program funded in whole 
or in part by either Santa Fe (a nonprofit institution) or a 

governmental entity. Santa Fe did not make a practice of buying 

out student debt to obtain employees, nor did it have procedures 

in place for making such arrangements. As far as we can tell, 

this was a unique, unprecedented arrangement created specifically 

to facilitate the acquisition of Dr. Crowe as a staff physician. 

 Santa Fe argues alternatively that educational benefits 

and loans need not be made pursuant to a program to be nondischargeable under section 523(a)(8). In support of its 

argument, Santa Fe relies upon In re Najafi, 154 B.R. 185 (Bankr. 

E.D. Pa. 1993), wherein the court concluded that an obligation 

for an educational benefit, although not made pursuant to a 

program was, "at least to some extent," within the scope of 

section 523(a)(8) because the debtor received an "educational 

benefit" which he failed to pay for. Najafi, 154 B.R. at 190. 

The Najafi court held non-dischargeable a former student's 

obligation to Cabrini College in Radnor, Pennsylvania, despite 

the fact that the college "was not adhering to its normal 

policies" when it allowed the debtor to register and attend 

classes without first paying his tuition in full. The court 

determined that it was "fair . . . to decide the debtor's 

liability to Cabrini on an equitable basis rather than by 

strictly applying the policies set forth in Cabrini's catalogue." 

Id. at 191. 

 In Najafi, however, the court first determined that the 

advance of credit constituted an "educational loan." Although 

the court later noted that the college deviated from its normal 
practice in admitting Najafi without advance payment, the 

question was not raised whether the loan constituted a part of 

the school's overall financial aid program. In the present case, 

there clearly was no educational loan "program"; rather there was 

the single loan made to Dr. Crowe. To the extent that Najafi

could be interpreted as not requiring a "program," we reject its 

reasoning as inconsistent with the statute. 

B. 

 Santa Fe's principal contention focusses on the 1990 

amendment to section 523(a)(8), which rendered non-dischargeable 

an "obligation to repay funds received as an educational benefit, 

scholarship, or stipend." Implicit in Santa Fe's argument is the 

assumption that any lender -- commercial or nonprofit -- which 

provides funds which, in turn, are used to repay an educational 

loan obligation, a fortiori, has provided "funds received as an 

educational benefit . . . ." This argument must fail, however, 

because as we have already noted, the only educational benefits 

or stipends provided to Dr. Crowe were provided by the NHSC and 

not by Santa Fe. 

 Moreover, as the bankruptcy court correctly noted, 

Santa Fe's interpretation of section 523(a)(8) is overly broad. 

Under its interpretation, if Dr. Crowe had repaid the NHSC from a 

combination of her savings and a personal or unsecured commercial 

loan (e.g., a credit card cash advance), the personal or 

commercial loan would be non-dischargeable under the 1990 

amendment. But the language of the subsection simply does not 

support the proffered construction. Santa Fe might stand on 
firmer ground if, for instance, section 523(a)(8) referred to "an 

obligation to repay funds received as or used to repay an 

educational benefit, scholarship, or stipend." Clearly, though, 

Congress did not enact such a provision, and neither the plain 

language of the 1990 amendment nor the policies which underlie 

the subsection support such an interpretation. 

VI. 

 Although limited, the legislative history of 

section 523(a)(8) teaches that the exclusion of educational loans 

from the discharge provisions was designed to remedy abuses of 

the educational loan system by restricting the ability of a 

student to discharge an educational loan by filing for bankruptcy 

shortly after graduation, and to safeguard the financial 

integrity of educational loan programs. See, e.g., 124 Cong. 

Rec. 1791-98 (1978); Pelkowski, 990 F.2d at 743. By enacting 

section 523(a)(8), Congress sought principally to protect 

government entities and nonprofit institutions of higher 

education -- places which lend money or guarantee loans to 

individuals for educational purposes -- from bankruptcy 

discharge. Because such loans are not based upon a borrower's 

proven credit-worthiness, and because they serve a purpose which 

Congress sought to encourage, section 523(a)(8) protects the 

lender when a borrower, who often would not qualify under 

traditional underwriting standards, files a chapter 7 bankruptcy. 

See In re Merchant, 958 F.2d at 740. 

 In its continuing effort to prevent such abuses and to 

protect the solvency of educational loan programs, Congress 
passed a series of amendments to section 523(a)(8) which extended 

its reach from educational loans to educational benefits. The 

amendments also extended the protection afforded under section 

523(a)(8) to any lender, in certain limited circumstances. 

Metaphorically speaking, the modification process not only 

expanded subsection (8) to catch more fish in its nondischargeability net, but has also narrowed the subsection to 

keep them from escaping. Epstein, Nickles & White, BANKRUPTCY:

PRACTITIONER TREATISE SERIES, Vol. 2, § 7-33. at 395 (West 1992). 

Despite the expansive amendments, however, section 523(a)(8) 

still does not reach the particular type of loan at issue in this 

case. 

 Santa Fe urges us to consider the purpose of the funds 

received instead of the purpose of the parties in determining the 

type of the loan it made to Dr. Crowe. It cites In re Ealy, 78 

B.R. 897 (Bankr. C.D. Ill. 1987) for the proposition that "[t]he 

test for determining whether a loan is a student loan is whether 

the proceeds of the loan were used for 'educational purposes.'" 

Ealy, 78 B.R. at 897, quoting In re Vretis, 56 B.R. 156, 157 

(Bankr. M.D. Fla. 1985). But we ask ourselves: how far can the 

term "educational purposes" be stretched? Santa Fe did not 

provide to Dr. Crowe a means to obtain an education in exchange 

for the loan. The "purpose" here was not to facilitate Dr. 

Crowe's education, which had long since been completed; instead, 

and this is undisputed, the purpose of the funds was to induce 

Dr. Crowe to accept employment with Santa Fe by providing her 

with a means to repay her obligation to the NHSC, an obligation 
which arose as a result of a scholarship. That said, however, 

Santa Fe asks us to go further. It contends that in addition to 

determining the purpose of the loan, we must determine the nature 

and character of the debt. Here, Santa Fe relies on Pelkowski, 

wherein we noted that "the focus of section 523(a)(8) is on the 

nature and character of the loan, not how the recipient actually 

spent the money." Pelkowski, 990 F.2d at 741, quoting In re 

Roberts, 149 B.R. 547 (C.D. Ill. 1993). 

 We believe the record amply supports the bankruptcy 

court's finding that the loan made by Santa Fe to Dr. Crowe had 

the nature and character of a buyout. It was made solely for the 

purpose of securing her services and, as such, cannot be fairly 

characterized as an educational loan or benefit.8

 

8. This case does not involve loan consolidations, which 

courts routinely have viewed as "educational loans," within the 

meaning of 11 U.S.C. § 523(a)(8). There is even a federal 

statute permitting such educational loan consolidations. See 20 

U.S.C. § 1078-3. Several courts have determined that 

consolidation loans meet the § 523(a)(8) definition and that the 

date of the consolidation loan starts the running of the 

seven-year limit of § 523(a)(8)(A). See Hiatt v. Indiana State 

Student Assistance Comm'n, 36 F.3d 21, 25 (7th Cir. 1994) ("We 

conclude that, in cases in which a debtor has consolidated her 

educational loans pursuant to 20 U.S.C. § 1078-3, the plain 

language of section 523(a)(8)(A) requires that the 

nondischargeability period commences on the date on which the 

consolidation loan first became due."), cert. denied, 115 S. Ct. 

1109 (1995); Martin v. Great Lakes Higher Educ. Assoc., 137 B.R. 

770, 772 (Bankr. W.D. Mo. 1992) ("[T]he court finds the 

consolidation loan is an educational loan covered by 11 U.S.C. 

§ 523(a)(8)(A) . . . . The consolidated loan is nondischargeable 

because it first became due less than five years before the 

bankruptcy filing."); see also In re Roberts, No. 91-7241, 1933 

WL 192816, at *3 (D. Kan. May 19, 1993) ("The court . . . agrees 

with the majority of courts deciding this issue and concludes 

that the date the debtor's consolidated loan first became due is 

the date for determining dischargeability under § 523(a)(8)(A).". 
 Furthermore, we do not find the loan "similar in nature 

to [a] student loan." See Appellant's Br. at 19, quoting 136 

Cong. Rec. H13288. Although the loan was made by a nonprofit 

institution, was unsecured and was used to repay an obligation 

incurred in return for an educational benefit, nothing in the 

express language or the legislative history of section 523(a)(8) 

convinces us that Congress intended for loans such as the one at 

issue here to be non-dischargeable in a chapter 7 bankruptcy. 

 Moreover, in light of what we have determined to be the 

intended purpose of section 523(a)(8), it is also significant 

that whether or not Santa Fe is ultimately repaid by the Debtors, 

neither the federal treasury, the solvency of the NHSC nor the 

public service obligation of Dr. Crowe will be affected. The 

debt to the educational lending program has been repaid and the 

service obligation has been deemed fully satisfied. See

Appellant's App. at 230a-31a. Furthermore, we agree with the 

bankruptcy court's observation that to the extent this decision 

might be interpreted as discouraging the refinancing of 

educational debt (a position advanced by Santa Fe which we 

consider to be of dubious merit), the purposes of section 

523(a)(8) will not be frustrated. 

VII. 

 For the reasons set forth above, we conclude that the 

loans made pursuant to the terms of an employment contract which 

are used, in turn, to repay educational debt are not, themselves, 

non-dischargeable educational loans within the meaning of 
11 U.S.C. § 523(a)(8). Accordingly, we will affirm the judgment 

of the district court. 

_________________________