In deciding whether a student loan debtor’s inability to maintain a minimal standard of living is likely to persist over a significant portion of the repayment period, the court looks to the remaining term of the loan, not the theoretical 25-year extension that a government program offers, according to a masterful opinion by Chief Bankruptcy Judge Eric L. Frank of Philadelphia.

Judge Frank said he had found no other opinions saying whether an uninvoked extension should define the length of financial incapacity required for discharging student loans under Section 523(a)(8), which bars discharge of qualifying student loans absent proof of “undue hardship.”

The opinion is a comprehensive study of the 1987 Brunner test adopted in most of the country, including the Third Circuit. The test has three elements: (1) the debtor’s inability to maintain a minimal standard of living if required to repay the loan; (2) proof of additional circumstances showing that the state of affairs is likely to continue for a significant portion of the repayment period on the student loan; and (3) the debtor’s good faith efforts to repay the loan.

Separated from her husband, the debtor was a 29-year-old woman who was the primary caregiver for her three young children. She had more than $25,000 in student loans, requiring some $300 a month in debt service. Although educated, healthy and licensed to be a vascular sonographer, the field is saturated, allowing her to work only 20 hours a week at about $35 an hour.

Judge Frank found that if she took a second job, the hourly wages would be so low that her additional income would be eaten up by higher child care expenses.

On the first prong, the government essentially conceded that she could not currently maintain a minimal standard of living if she were to repay the loan. On the third prong, the government also conceded that she had made good faith efforts to repay the loan, in part because she made loan payments for several years before separating from her husband. Also, she had investigated 20- and 25-year extended loan-repayment programs. The government’s witness agreed that the 25-year program was unsuitable for her. The 20-year program required larger payments than she could make.

Judge Frank therefore focused on the second prong: how long the debtor must show her inability to repay the loan.

The government argued that the 25-year extended payment program established the relevant repayment period, not the seven years when the loan would mature. Judge Frank said that using 25 years was “not unreasonable.” Nonetheless, he said “there are weighty counter-arguments.”

Although he gave four reasons for settling on the loan’s seven-year maturity as the relevant period, he focused most importantly on the court’s fact-finding process. Requiring the court to determine the debtor’s financial circumstances 10 or 15 years into the future, Judge Frank said, “will be nothing more than mere guesswork, without any reasonable degree of certitude.” Looking so far into the future would create the “danger of an overly strict application of Brunner, but also raises legitimate concerns about both the integrity of the judicial decision making process, as well as the public’s perception of the process.”

Despite the debtor’s potential eligibility for the 25-year repayment program, into which she declined to enter in good faith, Judge Frank held that the applicable repayment period under the second prong of the Brunner test “is the remaining contractual term of the debtor’s loan.”

Next, Judge Frank addressed how to pick the “significant portion” of the repayment period he would use in deciding whether the debtor’s financial incapacity would persist.

With seven years to run on the debtor’s 10-year loan, Judge Frank decided that five years, or about 70% of the remaining term, was the proper “significant portion.”

Although the case was a “close call,” Judge Frank discharged the loan because the debtor had shown by a preponderance of the evidence that her financial problems were “unlikely to improve” over the next five years. He said that the market was oversaturated with vascular sonographers. Additional employment in other fields, he said, will “not improve her net income or ability repay the loan” because a larger “paycheck will go to the additional child care expenses.”

Judge Frank’s opinion is notable for his conclusion that “certainty of hopelessness” is an improper test under Section 523(a)(8). He said that Brunner was “never intended to bar dischargeability based on an unlimited forecast into a debtor’s future.”

“I do not suggest that the Brunner text needs to be replaced,” Judge Frank said. His opinion nevertheless suggests that the test needs to be modified or improved in view of changes in the student loan program and in the statute itself since it was originally adopted and subsequently amended.