Student Loans At US Supreme Court: A New Loss For Students / Win For U.S. Government (McCoy v. U.S.)

Brunner’s “certainty of hopelessness” test? (photo by Marilyn Swanson)

By: Donald L Swanson

“Petition DENIED”

That’s the ruling of the U.S. Supreme Court, dated June 21, 2021, in McCoy v. United States (Case No. 20-886).

The question in McCoy v. United States focuses on the test for discharging student loans in bankruptcy, under the “undue hardship” standard of § 523(a)(8).  The test being applied by most bankruptcy courts (i.e., the Brunner test) is harsh—so much so that it’s commonly known as the “certainty of hopelessness” test.

Winner:  United States of America, as Creditor

The United States of America won.  It is the creditor for whose benefit student loans are made nondischargeable in bankruptcy.

The result of the “Petition DENIED” ruling in McCoy v. United States is this:

  • the harsh (aka “certainty of hopelessness”) discharge test for student loans will continue in effect for most cases.

Losers: Student Loan Debtors

The losers in the “Petiton DENIED” ruling are the student loan debtors experiencing a heavy dose of financial hardship, who cannot qualify for a bankruptcy discharge under the harsh Brunner test that’s applied in most courts.


What follows is a summary of arguments presented in the brief filed by the United States of America, as creditor, opposing McCoy’s Petition for a Writ of Certiorari.

This case presents an unsuitable vehicle for review, based on three technicalities:

  1. Petitioner did not preserve issues on adequacy of the Brunner test—and thereby forfeited those issues;
  2. Petitioner lost at the District Court because she failed to include citations to the record—a “clear violation” of Bankruptcy Rule 8014(a)(8); and
  3. Petitioner has not demonstrated that she would have obtained a discharge of her student loans under a different test.

Additionally, USA argues:

  • McCoy’s hardship is not undue because the repayment program requires nothing of her in the present hardship, and whatever remains due after 25 years can be forgiven [Note: the U.S.A. brief makes no mention of tax liabilities arising out of a loan forgiveness];
  • The Brunner test “is neither foreclosed by the statutory ‘undue hardship’ standard, nor inconsistent with the provision’s legal history”; and
  • Review is unwarranted because the U.S. Department of Education, (i) issued regulations on conceding undue hardship in certain circumstances, and (ii) is now reevaluating those regulations.


What follows is a summary of losing arguments (i.e., those supporting a more humane test for discharging student loans) presented in amicus briefs supporting McCoy as Petitioner.

Amicus Brief by (i) National Consumer Bankruptcy Rights Center, and (ii) National Association of Consumer Bankruptcy Attorneys

Here’s a link to their brief.

–The Center & The Association

National Consumer Bankruptcy Rights Center focuses on protecting rights of consumer debtors (who lack resources to protect their own rights) and preserving the integrity of the bankruptcy system. 

National Association of Consumer Bankruptcy Attorneys educates the legal community about uses and abuses of consumer bankruptcy processes and advocates on behalf of consumer debtors.

–The Argument

The Center, the Association, and their members, have experienced first-hand the widely inconsistent treatment of student loan debt in bankruptcy across the country.

The Bankruptcy Code permits debtors to discharge student loans for undue hardship. However, the circuits are divided on how to determine whether undue hardship exists. Two circuits use a totality of the circumstances test, while the others use the Brunner test.

Even among circuits that apply Brunner, its application varies significantly. The Fifth Circuit, in particular, is known for its needlessly harsh application. As a result, the Bankruptcy Code’s promise of relief for debtors suffering undue hardship is often illusory.

A writ of certiorari is needed to restore national uniformity on the test for student loan dischargeability in bankruptcy.

The statutory standard is the same for all bankruptcy courts.  The circuit courts, however, are irreconcilably divided on the meaning of “undue hardship.” So, the Bankruptcy Code’s promise of relief for student loan debtors depends more on where the debtor lives than on the text of the statute.

Amicus Brief by Consumer Bankruptcy and Student Loan Academics

Here’s a link to their brief.

–The Professors

The amici curiae are 35 academics with expertise in student debt and consumer bankruptcy, who have a professional interest in the correct application of the undue-hardship standard for discharging student loans in bankruptcy.

–The Argument

To interpret “undue hardship,” courts must look to, (i) goals of the nondischargeability provision, and (ii) broader purposes of the statutory scheme governing federal student loans (Title IV).

Over 90 percent of outstanding student loans are made under Title IV.  The Brunner test itself purports to be based on the “purposes of the guaranteed student loan program.”

Overly stingy application of the undue-hardship provision undermines the expressly articulated goals of the federal student loan programs.  Concerns include:

  • Fear of student debt deters low-income students from starting and completing higher education;
  • Unmanageable debt discourages borrowers from using their education for the economic benefit of society because their earnings simply go to creditors;
  • Fear of financial distress distorts students’ career choices; and
  • Many student loans are harmful to borrowers, who would have been better off never borrowing for higher education.

When student loan borrowers are irrevocably bound to debts they cannot repay, such concerns are exacerbated.

Brunner imagines a harsh “quid pro quo” in which the federal government “exacts” a price of near-total nondischargeability in exchange for making student loans.

The Brunner test and Fifth Circuit decisions adopting and applying it are fundamentally flawed.

In limiting dischargeability of student loans to “undue hardship,” Congress intended to combat abuse and enhance repayment. But in interpreting “undue hardship,” courts should also act to advance the education-promoting goals of the overall statutory scheme.

Amicus Brief by Center for Responsible Lending

Here’s a link to its brief.

–The Center

Center for Responsible Lending focuses on consumer financial products for marginalized and underserved people and communities. It opposes abusive student lending practices, which burden people of color and low-wealth individuals and communities, and advocates for the discharge of debts when consumers are not realistically able to repay.

–The Argument

Student loans are nondischargeable, unless repayment would cause “undue hardship” under 11 U.S.C. § 523(a)(8).

Initially, “undue hardship” was a safety valve, permitting discharge of student loans during the first five years of repayment, after which those loans were dischargeable without qualification—by any debtor.

Today, “undue hardship” is the sole avenue for honest debtors to seek discharge of their student loans.  And the Brunner test, applied by most courts, interprets “undue hardship” in draconian ways, demanding “total incapacity” or a “certainty of hopelessness” in repayment.

Congress did not define “undue hardship,” and federal courts of appeals have settled on two starkly divergent tests for defining that term:

  1. Totality-of-the-circumstances test—this test employs an open-ended set of factors to consider, of which no one factor is dispositive; and
  2. Brunner test—this test has three independent, mandatory prongs: (i) presently unable to cover basic expenses while repaying the loans, (ii) such inability will persist long-term, and (iii) have made good-faith attempts at repayment.

Moreover, student loan burdens are felt most by low-income / low-wealth debtors.  Such people are overwhelmingly in communities of color, where it is harder to bounce back after financial difficulty because of fewer resources to cushion the fall or to navigate the bankruptcy system.

Brunner test compounds the problem by denying the “fresh start” that bankruptcy normally promises and by imposing unwarranted complexity, difficulty and expense into the bankruptcy process.

A simpler, more flexible, and holistic test for undue hardship would comport with the text and purpose of the statute. It would also be more consistent with the purposes of the Bankruptcy Code, helping the low-income debtors who most need a “fresh start.”


If debtors are hoping to get help from the U.S. Supreme Court in creating a more humane standard for discharging student loans, they are disappointed.

The U.S. Supreme Court commonly sides with interests of the United States Government on bankruptcy issues in which the United States is a creditor.  This certiorari denial opinion is more of the same.

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