by Amicus Brief Argues Mixed-Purpose Loans and Loans for Non-Title IV-Eligible Programs Do Not Qualify for § 523(a)(8)(B)’s Exception to Discharge
The National Consumer Bankruptcy Rights Center (NCBRC), the National Association of Consumer Bankruptcy Attorneys (NACBA), and the National Consumer Law Center (NCLC) have filed an amicus brief in the Ninth Circuit in Nichols v. Pearson (In re Pearson), Nos. 26-1962 & 26-1963, urging the court to affirm a Bankruptcy Appellate Panel decision holding that a private educational loan that does not satisfy the statutory definition of a “qualified education loan” is dischargeable in bankruptcy.
The case presents an important question concerning the scope of the student-loan exception to discharge under 11 U.S.C. § 523(a)(8)(B). Although the loan in this case was made by the debtor’s former in-laws rather than a commercial student lender, the amici emphasize that the Ninth Circuit’s decision could have significant consequences for thousands of consumer debtors with private student loans.
The amicus brief was authored by George F. Carpinello and Jenna C. Smith of Boies Schiller Flexner LLP and filed on August 17, 2026.
The Dispute
James Pearson borrowed $331,500 from Robert and Cora Nichols to finance his education, including prerequisite undergraduate coursework and his later medical education at St. George’s University School of Medicine. After Pearson filed Chapter 7, the Nichols sought a determination that the debt was nondischargeable under § 523(a)(8)(B).
The bankruptcy court concluded that $266,876.81 of the loan was nondischargeable because that amount represented qualified medical-school expenses, while the remainder was dischargeable.
The Ninth Circuit Bankruptcy Appellate Panel reversed. Section 523(a)(8)(B) applies only to a “qualified education loan,” which the Internal Revenue Code defines as indebtedness incurred “solely to pay qualified higher education expenses.” Because the loan financed both qualified and non-qualified expenses, the BAP held that the loan as a whole failed the statutory definition and could not be divided into dischargeable and nondischargeable portions. The BAP concluded that a multi-purpose loan is not a qualified education loan and that § 523(a)(8)(B) does not authorize courts to preserve nondischargeability for only part of such a loan.
The Nichols appealed to the Ninth Circuit, arguing principally that the entire $331,500 loan should be nondischargeable because its purpose was to finance Pearson’s medical education. They also argue that the statutory inquiry focuses on the eligibility of the educational institution rather than the eligibility of the particular educational program.
Amici: Congress Said “Solely”
NCBRC, NACBA, and NCLC urge the Ninth Circuit to enforce the limitation Congress actually enacted.
Section 523(a)(8)(B) does not except every debt incurred for an educational purpose from discharge. Instead, it incorporates the narrower Internal Revenue Code definition of a “qualified education loan”. In Section 221(d)(1) of the Internal Revenue Code defines
qualified education loan as “any indebtedness incurred by the taxpayer solely to pay
qualified higher education expenses…” .
According to the amici, allowing courts to separate a mixed-purpose loan into qualified and non-qualified components would effectively read the word “solely” out of the statute. The statutory exception applies to the loan itself, not merely to whatever portion of its proceeds might ultimately be traced to qualifying expenses.
The brief emphasizes that there is no statutory authorization for a “partial” exception from discharge under § 523(a)(8)(B): if a private loan was not incurred solely for qualified higher education expenses, it does not satisfy the definition of a qualified education loan.
Treasury regulations reinforce that conclusion. They specifically address a mixed-use loan and provide that when a borrower obtains a single loan partly for qualified education expenses and partly for another purpose, the loan is not a qualified education loan.
The amici also argue that this rule creates appropriate incentives for private student lenders. Lenders seeking the extraordinary protection from discharge provided by § 523(a)(8)(B) can structure and certify their loans to ensure that they fall within the statutory requirements. Allowing lenders to obtain nondischargeability for part of an uncertified or mixed-purpose loan would weaken those safeguards and encourage lenders to avoid verifying that loans are actually limited to qualified educational expenses.
Program Eligibility Also Matters
The amicus brief offers a second ground supporting discharge. It argues that a student loan is nondischargeable only if it is used for the payment of the cost of attendance at a Title IV-approved program. A loan for expenses at a non-approved program at a Title IV institution is not a qualified education loan under the terms of Section 523(a)(8)(B) of the Bankruptcy Code.
Pearson spent his first year of medical school studying at Northumbria University in England through a program associated with St. George’s University School of Medicine. Although St. George’s itself was a Title IV-eligible institution, the amici argue that the particular Northumbria program was not Title IV eligible.
The amici reject the argument that an institution’s Title IV status automatically converts every course or program it offers into a qualifying educational program. Schools eligible for federal student aid routinely offer courses and programs that themselves are not eligible for Title IV assistance. The Higher Education Act and its implementing regulations, the brief argues, require more than simply identifying a qualifying institution.
Because Pearson’s first year of medical school in England was not a Title IV-eligible program, the amici argue that the expenses associated with that program were not qualified higher education expenses—providing an independent reason why the loan does not qualify for § 523(a)(8)(B)’s exception from discharge.