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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 01-10516
_______________
IN THE MATTER OF:
DANIEL G. MURPHY,
Debtor.
DANIEL G. MURPHY,
Appellant,
VERSUS
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY
and
EDUCATIONAL CREDIT MANAGEMENT CORPORATION,
Appellees.
_________________________
Appeal from the United States District Court
for the Northern District of Texas
_________________________
March 5, 2002

Before SMITH and DEMOSS, Circuit Judges,
Education Credit Management Corporation
and LAKE, District Judge.*
("ECMC") is a non-profit Minnesota
corporation that provides financial assistance
JERRY E. SMITH, Circuit Judge:
to students enrolled in higher education
programs. ECMC holds nine promissory notes
Daniel Murphy borrowed approximately
executed by Murphy.1 As of March 15, 2000,
$55,000 in federally guaranteed loans to attend
Murphy owed ECMC $64,178.54.
institutions of higher learning. Shortly after
receiving and L.L.M. degree, he filed for
Pennsylvania Higher Education Assistance
chapter 7 bankruptcy. The bankruptcy court
Agency ("PHEAA") is a government agency
held that 11 U.S.C. ง 523(a)(8) bars him from
organized under the laws of Pennsylvania, that
discharging any of those loans in bankruptcy,
provides financial assistance to students en-
because he obtained them to finance his
rolled in higher education programs. PHEAA
education and signed promissory notes
holds a promissary note dated July 5, 1996 for
reflecting that purpose. The district court
federal Stafford loans totaling $18,5000. The
affirmed, and, finding no error, we also affirm.
parties stipulated that Murphy spent $7,000 on
tuition and related expenses and $11,500 on
I.
other living expenses; as of March 10, 2000,
Murphy matriculated at Michigan State
he owed PHEAA $22,472.40.
University in 1986 and graduated in 1990. He
then attended Thomas M. Cooley Law School
Murphy filed and obtained a consumer
for three years and received his J.D. degree.
chapter 7 discharge, then filed an adversary
In 1997, he obtained an L.L.M. from Wayne
proceeding against PHEAA and ECMC, al-
State University. He financed his education
leging that the portion of the student loans
through approximately $55,000 in student
spent on living expenses was nondischarge-
loans issued under the Federal Family
able. The bankruptcy court granted summary
Education Loan Program "(FFELP"), 20
judgment in favor of PHEAA and ECMC.
U.S.C. งง 1071 et seq.
II.
Murphy describes a uniform procedure for
The Bankruptcy Code prevents former
receiving the loans: He appeared at the
students from discharging educational loans in
financial aid office, discussed his needs, and
bankruptcy. 11 U.S.C. ง 523(a)(8). Courts
signed a promissory note. The lender
have divided over whether students who use a
disbursed the loan to the school, which
portion of their student loans for room, board,
withheld tuition and expenses and gave
and living expenses can discharge that portion
Murphy the remainder for discretionary
spending. Murphy used the money to
purchase a car, housing, and food and to pay
1 The notes reflect the following dates and
fraternity dues and other ordinary living
amounts: (1) May 3, 1993, $7,500; (2) April 18,
expenses.
1994, $8,500; (3) October 4, 1994, $4,500;
(4) April 17, 1995, $2,834; (5) April 17, 1995,
$3,334; (6) August 22, 1995, $5,666; (7) August
* District Judge of the Southern District of
22, 1995, $6,666; (8) May 3, 1993, $4,000; and
Texas, sitting by designation.
(9) April 18, 1994, $5,500.
2

of the debt in bankruptcy. Some courts have
nondischargeability. In other words, it is the
held that when the lender makes the loan
purpose, not the use, of the loan that controls.
available for educational purposes, no part of
Treating FFELP guaranteed loans uniformly,
the loan can be discharged in bankruptcy, re-
regardless of actual use, is true to the text and
gardless of the actual use.2 Other courts have
will prevent recent graduates from reneging on
held that when the student spends the money
manageable debts and will preserve the sol-
on noneducational items and services, that
vency of the student loan system.
portion can be discharged.3 We conclude that
the text of the Bankruptcy Code, the Federal
A.
Family Education Loan Program ("FFELP"),
We review the bankruptcy and district
and Murphy's promissory notes support
court's interpretation of ง 523(a)(8) de novo.4
That section explains that a discharge "does
not discharge an individual debtor from any
2
debtSS"
Constr. Equip. Fed. Credit Union v. Roberts
(In re Roberts), 149 B.R. 547, 551 (C.D. Ill. 1993)
(finding it unnecessary to remand to apportion loan
for an educational benefit overpayment
proceeds spent on educational expenses and living
or loan made, insured or guaranteed by
expenses); In re Pelzman, 233 B.R. 575, 580
a governmental unit, or made under any
(Bankr. D.D.C. 1999) (finding that university's
program funded in whole or in part by a
extension of credit for room and board fell within
governmental unit or nonprofit
the scope of an educational loan); Stevens Inst. of
institution, or for an obligation to repay
Tech. v. Joyner (In re Joyner), 171 B.R. 762, 764-
funds received as an education benefit
65 (Bankr. E.D. Pa. 1994) (finding that room,
scholarship or stipend, unless excepting
board, and other living expenses serve an
such debt from discharge under this
educational purpose and refusing to find that por-
paragraph will impose an undue
tion dischargeable); United States Dep't of Health
hardship on the debtor and the debtor's
and Human Servs. v. Vretis (In re Vretis), 56 B.R.
dependents.
156, 157 (Bankr. M.D. Fla. 1985) (finding that sti-
pend that provided for rent and living expenses was
not dischargeable).
11 U.S.C. ง 523(a)(8). The section exempts
"educational . . . loan[s] made, insured or
3 Ealy v. First Nat'l Bank (In re Ealy), 78 B.R.
guaranteed by a governmental unit." The plain
897, 898 (Bankr. C.D. Ill. 1987) (finding portion
language suggests two limitsSSthe adjective
of loan that student used to purchase truck, pay off
wife's car, and pay for other miscellaneous
expenses dischargeable in bankruptcy); United
States Dep't of Health & Human Servs. v. Brown
4 We review a bankruptcy court's legal
(In re Brown), 59 B.R. 40, 43 (Bankr. W.D. La.
conclusions de novo. Texas Lottery Comm'n v.
1986) (instructing government to separate portion
Tran (In re Tran), 151 F.3d 339, 342 (5th Cir.
of stipend spent on tuition and books from portion
1998). Summary judgment decisions and statutory
spent on rent and living expenses); Dep't of Mental
interpretation questions are legal findings that we
Health, State of Missouri v. Shipman (In re
review de novo. Samson v. Apollo Resources,
Shipman), 33 B.R. 80, 82 (Bankr. W.D. Mo.
Inc., 242 F.2d 629, 633 (5th Cir.) (statutory
1983) (discharging stipend partially because the
interpretation), cert. denied, 122 S. Ct. 63 (2001);
debtor spent the proceeds on rent and living
Herman v. Holiday, 238 F.3d 660, 663 (5th Cir.
expenses).
2001) (summary judgment).
3

"educational" and the requirement that a
attending school full-time.5
governmental or nonprofit body make or
guarantee the loan.
In the alternative, Murphy argues that the
phrase "educational benefit" modifies both
At first cut, PHEEA's and ECMC's loans
overpayment and loan. He infers that the re-
satisfy these two limits. PHEEA and ECMC
sulting phrase "educational benefit loan" re-
made the loans to Murphy pursuant to a
quires not only that the lender intend that the
federal statute that provides for educational
funds go towards educational purposes but
loans; the government also insured the loans
also that the borrower spend the funds on
against Murphy's default.
tuition or books. For three reasons, Murphy's
interpretation is strained, at best.
Murphy insists, however, that we should
read another limit into ง 523(a)(8). He
First, the word "educational," rather than
contends that students may discharge the
"educational benefit," modifies "loan." When
portion of their educational loans not spent or
Congress amended ง 523(a)(8) in 1990, it
tuition or books. He points to cases holding
replaced "educational loan" with "educational
that "[t]he test for determining whether a loan
benefit overpayment or loan."6 Courts have
is a student loan is whether the proceeds of the
interpreted the phrase "educational benefit
loan were used for `educational purposes.'"
overpayment" to include a category of
E.g., In re Ealy, 78 B.R. at 898 (citations
governmental programs that pay students for
omitted). None of these cases considers a loan
the anticipated cost of future tuition.7 After
made pursuant to a federal student loan
statute, but Murphy would have us extend
5
their reasoning. He variously argues that the
In re Pelzman, 233 B.R. at 580; In re Joyner,
word "educational" or phrase "educational
171 B.R. at 764-65.
benefit" permits students to discharge the por-
6 Before the 1990 amendments, ง 523(a)(8)
tion of student loan proceeds spent on living
excluded from discharge "an educational loan
or social expenses.
made, insured or guaranteed by a governmental
unit, or made under any program funded in whole
The textual hook for Murphy's argument is
or in part by a governmental unit or nonprofit in-
puzzling; he reads too much into the adjective
stitution." 11 U.S.C. ง 523(a)(8) (1988). To
"educational." Section 523(a)(8) does not ex-
expand ง 523(a)(8)'s scope, the 1990 amendments
pressly state that only loans "used for tuition"
added the categories of (1) overpaying a grant and
are nondischargeable. Nor does it define edu-
(2) scholarship funds or stipends. Crime Control
cational loans as excluding living or social ex-
Act of 1990, Pub. L. No. 101-647, ง 3621(a), 104
penses. Barth v. Wis. Higher Educ. Corp. (In
Stat. 4964, 4964-65 (1990). See Santa Fe Med.
re Barth), 86 B.R. 146, 148 (Bankr. W.D.
Servs., Inc. v. Segal (In re Segal), 57 F.3d 342,
Wis. 1988) ("The language of section
348-49 (3d Cir. 1995).
523(a)(8) does not refer to whether the debtor
7 "An `educational benefit overpayment' is an
or anyone else derived educational benefits.").
overpayment from a program such as the GI Bill
Loans for room and board facilitate an
under which where students receive periodic
education and meet expenses incidental to
payments while they are enrolled in school, but if
the students receive payments after they have left
(continued...)
4

the 1990 amendments, courts continued to
(Merriam-Webster 3d ed. 1986).9 If
examine loans to determine whether they were
"educational benefit" modifies both
"educational loans";8 no court has suggested
"scholarship" and "stipend," then Murphy's
that the word "benefit" should reduce the
interpretation of the phrase "educational
scope of covered loans.
benefit" would eliminate a core meaning of the
word "stipend." If the second "educational
Additionally, ง 523(a)(8)'s second use of
benefit" modifies only the word "scholarship"
the word "educational benefit" before
and not the word "stipend," then it is difficult
"stipend" creates a serious problem for Mur-
to understand why the second invocation of
phy's interpretation. The section employs a
"educational benefit" should have more limited
parallel structure when describing another type
scope than does the first.
of nondischargeable debt as arising from "an
education benefit scholarship or stipend."
In other words, why would Congress have
placed the phrase "educational benefit" before
"Stipend" is defined in part as "a regular
two separate series of items in the same
allowance paid to defray living expenses; esp.
paragraph and intended for it to modify
a sum paid to a student under the terms of a
different elements in each series? The
fellowship or scholarship." WEBSTER'S THIRD
inclusion of the word stipend proves either
NEW INTERNATIONAL DICTIONARY at 2245
that "educational benefit" includes living
expenses or that it describes only the type of
overpayment and not the type of loan.
Finally, even if we were to interpret
ง 523(a)(8) to require an "educational benefit
7(...continued)
loan," Murphy does not explain why that
the school, that is an educational benefit
phrase requires us to look to use rather than
overpayment." College of Saint Rose v. Regner
purpose. All Stafford loans are intended to
(In re Renshaw), 229 B.R. 552, 556 & n.7 (BAP
convey educational benefits, and a grant of
2d Cir. 1999), aff'd, 222 F.3d 82 (2d Cir. 2000).
New Mexico Inst. of Mining and Tech. v. Coole
living expenses enables a student to attend
(In re Coole), 202 B.R. 518, 519 (Bankr. D.N.M.
school full-time, which certainly has
1996); Alibatya v. New York Univ. (In re
educational benefits. We now turn to the
Alibatya), 178 B.R. 335, 338 (Bankr. E.D.N.Y.
FFELP to examine the unique features of loans
1995); Johnson v. Va. Commonwealth Univ. (In re
made pursuant to that federal statute.
Johnson), 222 B.R. 783, 786 (Bankr. E.D. Va.
1998).
8 E.g., In re Renshaw, 229 B.R. at 559-60
(characterizing question as whether debtor received
9 Other dictionaries contain even broader de-
an "educational loan" and not an "educational
finitions of "stipend." BLACK'S LAW DICTIONARY
benefit loan"); Shaffer v. United Student Aid
at 1426 (West Deluxe 7th ed. 1999) ("A salary or
Funds (In re Shaffer), 237 B.R. 617, 618 (Bankr.
other regular, periodic payment."); XVI OXFORD
N.D. Tex. 1999) (same); In re Pelzman, 233 B.R.
ENGLISH DICTIONARY 713 (Oxford 2d ed. 1989)
at 576-77 (same); In re Alibatya, 178 B.R. at 338
("A fixed periodical payment of any kind, e.g. a
("The term `educational' is merely an adjective
pension or allowance . . . . Also . . . to keep in
describing `loan.'").
stipend, to defray the maintenance of.").
5

B.
statutes interact coherently and harmonious-
The FFELP includes living expenses in its
ly.11 If Congress defined living expense al-
loans to full-time students for educational pur-
lowances as serving an educational purpose in
poses. First, the FFELP contemplates that stu-
the student loan statutes, we should assume it
dents can use federal loans to finance a full-
also interpreted those living expense
time education. The statute distinguishes be-
allowances as having an educational purpose in
tween students who take heavier course loads
the Bankruptcy Code.
and those who take lighter loads.10 Permitting
students to take out loans for living expenses
The evidence in this particular case
enables them to attend school full time.
confirms that Murphy borrowed money for
living expenses as part of his broader effort to
Second, the FFELP calculates the "costs of
obtain an education. In the promissory notes,
attendance" by including allowances for "room
he acknowledged that he was borrowing the
and board," 20 U.S.C. ง 1097ll(3),
money for educational purposes.12 He later
"miscellaneous personal expenses," 20 U.S.C.
ง 1087ll(2), and child care, 20 U.S.C.
ง 1087ll(8). The FFELP's need analysis as-
11 E.g., Pierce v. Underwood, 487 U.S. 552,
sumes that loans must cover a full-time stu-
561-63 (1988) (interpreting phrase "justified to a
dent's living expenses so that he has the time
high degree" in the Equal Access to Justice Act as
and energy to study and attend classes.
having the same meaning as the same phrase
contained in other statutes and the Federal Rules of
Murphy argues that the Bankruptcy Code
Civil Procedure); Lorillard v. Pons, 434 U.S. 575,
and not the FFELP should define discharge-
584 (1978) (looking to judicial interpretation of
able and nondischargeable loans. First,
identical terms in other statutes).
ง 523(a)(8) has a direct link to the Higher Ed-
12 The PHEAA note provides that the loans
ucational Act, because Congress originally in-
were (1) issued under the Federal Stafford Loan
cluded it in the educational act and only later
Program and (2) governed by the Higher Education
moved it to the Bankruptcy Code. In re Ship-
Act of 1965, 20 U.S.C. ง 1070. Murphy rep-
man, 33 B.R. at 82. Second, we should
resented on the borrower certification of the note
attempt to give horizontal coherence to the
that (1) he must return all loan proceeds not rea-
United States Code and ensure that different
sonably attributed to educational expenses for the
cost of attendance on at least a half-time basis; and
(2) the total amount of loans received under the
10 As an initial condition for insurance
note would not exceed his maximum eligibility
eligibility, a student must take half of the courses
under the Higher Education Act of 1965. The
necessary for full-time enrollment. 20 U.S.C.
amount of the PHEAA loans corresponded exactly
ง 1077(a). The need analysis then includes larger
to the "cost of attendance" certified by Wayne
living expense allowances for full-time students
State University on the note.
and smaller living expense allowances for part-time
or correspondence students. 20 U.S.C. ง 1087ll(4)
The ECMC note also included a "borrower
(withholding room and board and personal
certification" that Murphy would "immediately
expenses from less than half-time students); 20
repay any loan proceeds that cannot reasonably be
U.S.C. ง 1087ll (limiting the room and board costs
attributed to educational expenses for attendance
of correspondence students to any necessary
on at least a half-time basis at the certifying
residential training).
(continued...)
6

testified that he borrowed the funds to support
create two perverse effects: (1)
his full-time attendance. When a federal
Dischargeability would reward irresponsible
student loan statute authorizes the loan, the
student borrowers and punish responsible
student signs an agreement to spend the funds
borrowers; and (2) the federal government
on educational expenses, and the government
would have to pay out more to cover the costs
guarantees the loan, then the loan should be
of defaulting students' loans. Murphy's
nondischargeable.
interpretation would create the type of absurd
result that even rigid textualists seek to
C.
avoid.15
Permitting students to discharge student
loans in bankruptcy because the student spent
Murphy argues that private lenders
the money on social uses, alcohol, or even
currently receive the benefit of governmental
drugs would create an absurd result. Students
guarantees on these loans, so these lenders
who used the loan proceeds to finance an edu-
have an incentive to expand the scope of "edu-
cation would retain the burden of paying them
cational loans." Perhaps. If so, then the gov-
even after a chapter 7 discharge; irresponsible
ernment has the judicial remedy of suing pri-
students who abused the loans would gain the
vate lenders directly and the legislative remedy
benefits of discharge. Courts have emphasized
of redefining the needs analysis of the FFELP.
two purposes when analyzing ง 523(a)(8): (1)
preventing undeserving debtors from abusing
educational loan programs by declaring
The potential windfalls of private lenders do
bankruptcy immediately after graduating;13 and
not provide a persuasive reason for us to
(2) preserving the financial integrity of the loan
rewrite ง 523(a)(8). Doing so would affect
system.14 Murphy's interpretation would
the private lenders only indirectly, because the
governmental insurers, rather than private
lenders, would bear the burden of the loss.
12
This remedy also would create perverse
(...continued)
incentives for student borrowers, squarely at
school."
odds with the only purposes that Congress has
13 In re Segal, 57 F.3d at 348-49
(acknowledging that ง 523(a)(8) was enacted to
"remedy abuses of the educational loan system by
14(...continued)
restricting the ability of a student to discharge an
taxpayers."); In re Alibatya, 178 B.R. at 340
educational loan by filing for bankruptcy shortly
(citing a Senate Report, House Report, and Senator
after graduation"); Andrews Univ. v. Merchant (In
DeConcini's statement).
re Merchant), 958 F.2d 738, 740 (6th Cir. 1992)
(citing a House report and floor statement by
15 E.g., Green v. Bock Laundry, 490 U.S. 504,
Senator DeConcini).
527 (1999) (Scalia, J., concurring) ("I think it
entirely appropriate to consult all public materials,
14 In re Renshaw, 222 F.3d at 86-87 ("Congress
including the background of Rule 609(a)(1) and the
enacted ง 523(a)(8) because there was evidence of
legislative history of its adoption, to verify that
an increasing abuse of the bankruptcy process that
what seems to us an unthinkable disposition . . .
threatened the viability of educational loan
was indeed unthought of, and thus to justify a
programs and harm to future students as well as
departure from the ordinary meaning of the word
(continued...)
`defendant.'").
7

ascribed to the FFELP.
Because the bankruptcy and district courts'
interpretation of ง 523(a)(8) best comports
with the text of the Bankruptcy Code and
FFELP, the judgment is AFFIRMED.
8