In McDaniel, the Court dealt with the issue of whether Debtors’ private educational loans issued by Navient Solutions, LLC (“Navient”) fit within the exception to discharge enumerated in Section 523(a)(8)(A)(ii) for “obligation[s] to repay funds received as an educational benefit, scholarship, or stipend” as a matter of law. 11 U.S.C. 523(a)(8)(A)(ii). The Court held they did not.
In their Complaint, Plaintiffs seek declaratory judgment their private student loans were discharged. Navient moved to dismiss the Complaint on several grounds, including that such loans were, as a matter of law, excepted from discharge pursuant to Section 523(a)(8)(A)(ii).
The Court denied Navient’s motion to dismiss. The Court determined a private student loan is not “an obligation to repay funds received as an educational benefit, scholarship, or stipend” under Section 523(a)(8)(A)(ii). Taking a narrow view of the subsection, the Court held such exception to discharge does not encompass any loan that confers an educational benefit upon the debtor – such as a private educational loan – but rather, the language of the statute sets an educational benefit apart from a loan, and excepts from discharge a category of obligations that does not include loans but rather, “educational benefit[s]”, “scholarship[s],” and “stipend[s].” The Court based its decision on the plain language of Section 523(a)(8)(A)(ii), in the context of its neighboring provisions, Sections 523(a)(8)(A)(i) and (B). The Court also found to the extent the statute was at all ambiguous, application of the doctrine of noscitur a sociis and the legislative history supported the Court’s conclusion.