Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-16-1995

In Re: Stanton L. Segal
Precedential or Non-Precedential:

Docket 94-1222




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            UNITED STATES COURT OF APPEALS
                FOR THE THIRD CIRCUIT

                     ___________

                     No. 94-1222
                     ___________


  IN RE:    STANTON L. SEGAL,

                          Debtor

          ELIZABETH CROWE SEGAL,

                          Debtor

  SANTA FE MEDICAL SERVICES, INC.,

                          Appellant,

                    vs.

  STANTON L. SEGAL; ELIZABETH CROWE SEGAL,

                          Appellees,

  CHRISTINE C. SHUBERT, ESQ.,

                          Trustee

  FREDERIC BAKER, ESQ.,

                          Trustee

                     ___________


   APPEAL FROM THE UNITED STATES DISTRICT COURT
     FOR THE EASTERN DISTRICT OF PENNSYLVANIA

             (D.C. Civil No. 93-cv-06460)

                     ___________


                 ARGUED JULY 20, 1994

BEFORE:    SCIRICA, LEWIS and SEITZ, Circuit Judges.
                    (Filed     June 16 , 1995)

                             ___________


Kenneth F. Carobus (ARGUED)
Morris, Adelman, Dickman & Carpel
1920 Chestnut Street, Suite 400
Post Office Box 30477
Philadelphia, PA 19103-8477

          Attorney for Appellant


Andrew N. Schwartz
David C. Silverman (ARGUED)
Shaiman, Phelan & Schwartz
1411 Walnut Street, Suite 1015
Philadelphia, PA 19102

          Attorneys for Appellees


                             ___________

                        OPINION OF THE COURT
                            ___________


LEWIS, Circuit Judge.

          This appeal requires us to determine whether loans made

pursuant to the terms of an employment contract, and which are
used to repay educational debt, are non-dischargeable within the

meaning of 11 U.S.C. § 523(a)(8).      The Bankruptcy Court concluded

that they are dischargeable.     Because we do not believe that such

loans are educational in nature and are therefore not subject to

the non-dischargeability exception set forth in section

523(a)(8), we will affirm.

                                  I.

          On June 20, 1978, Appellee Dr. Elizabeth Crowe Segal

("Dr. Crowe") signed a Scholarship Program Contract ("Scholarship
Contract") with the National Health Service Corps ("NHSC"), which

allowed her to receive educational benefits from, and caused her

to incur an obligation to, the NHSC.1    Under the terms of the

contract, Dr. Crowe received medical school tuition support and

various stipends during the course of her studies, which she

completed in 1982.    Also in 1982, Dr. Crowe married Appellee Dr.

Stanton Segal ("Dr. Segal") who was at no time a party to, nor

obligated under, the Scholarship Contract.2

          Pursuant to the Scholarship Contract, Dr. Crowe became

obligated, upon her graduation from medical school, to provide

medical services for approximately four years at a location

designated by the NHSC.    She apparently received a deferment to

begin service immediately after completing a residency, and she

began practicing at an approved NHSC site in Jasper, Florida, in

July 1986.    Dr. Crowe worked at the Jasper site until April 1989,

thereby satisfying all but approximately 19 months of her

four-year obligation to NHSC.    At that time, Dr. Crowe elected to

satisfy the remaining obligation under the Scholarship Program by

way of repayment.    (The Scholarship Contract provided that in

lieu of services, a cash payment could be made to satisfy the

obligation.    See 42 U.S.C. § 254o.)   The means by which Dr. Crowe


1
 .    Section 751 of the Public Health Service Act (42 U.S.C.
§ 294t) established the National Health Service Corps Scholarship
Program and authorized the Secretary of Health, Education and
Welfare to provide applicants selected to be participants in the
program with scholarship awards.
2
 .    For ease of reference and where appropriate, we will
occasionally refer to Dr. Crowe and Dr. Segal as the "debtors."
obtained the funds to satisfy her obligation to the NHSC,

detailed below, give rise to the controversy over the scope of

section 523(a)(8).

          During the time that Dr. Crowe was practicing in

Jasper, Dr. Segal became affiliated with Lake Shore Hospital in

Lake City, Florida.   Lake Shore Hospital is owned by Santa Fe

HealthCare, Inc. ("HealthCare"), which also owns Appellant Santa

Fe Medical Services ("Santa Fe"), a Gainesville, Florida,

nonprofit corporation.   HealthCare was recruiting physicians to

provide Obstetrics and Gynecological ("OB\GYN") services in the

area surrounding Lake Shore Hospital.   Dr. Crowe was both willing

and able to provide these medical services, but she first had to

satisfy her obligation to the NHSC.   After some negotiation, Dr.

Crowe and Santa Fe, by and through its principal, HealthCare,

entered into a Physician Employment Contract ("Employment

Contract"), the terms of which included a loan from Santa Fe to

Dr. Crowe.   Section 7 of the Employment Contract provides, in

pertinent part:
          (a) In addition to [Dr. Crowe's] salary,
          SantaFe shall loan [Dr. Crowe] up to Two
          Hundred Thousand dollars ($200,000) upon the
          execution of this Agreement by the Physician
          and upon the execution of the attached
          promissory note by the Physician and her
          husband. Said amount shall be used solely
          and exclusively to satisfy the Physician's
          obligation to the United States National
          Health Service.


          The promissory note referred to in Section 7 of the

Employment Contract states at the outset:
          For value received, we Betsy Crowe, M.D., and
          Stanton Segal, M.D. (collectively referred to
            as "the Maker") promise to pay to the order
            of SantaFe Medical Services, Inc. ("Payee")
            the sum of Two Hundred Thousand dollars
            ($200,000.00) in the following manner: in
            thirty-six equal monthly payments of then
            outstanding principal each, beginning May 15,
            1991, and due on the first day of each month
            thereafter until the entire amount is paid,
            with interest on the unpaid balance at the
            prime rate . . . .


            In accordance with the provisions of the Employment

Contract, Santa Fe loaned the Debtors $182,619.17, an amount

which corresponds to the precise figure owed by Dr. Crowe to the

NHSC.3   On October 31, 1989, Santa Fe issued a check for that

amount made payable to the Debtors and the Health Resources and

Services Administration, a division of the then Department of

Health, Education, and Welfare.4   The Debtors do not dispute that

they received this amount, nor is there any suggestion that the

funds were not paid to the NHSC.

                                II.

            It is likewise undisputed that by April 29, 1992, the

date upon which Drs. Crowe and Segal filed a petition for

bankruptcy relief under Chapter 7, they had repaid only $5,000 to

Santa Fe.

            Santa Fe filed a Complaint to Determine

Dischargeability in the United States Bankruptcy Court for the

3
 .    Although the promissory note indicates that the amount owed
was $200,000, it is undisputed that the actual amount of the debt
was $182,619.17.
4
 .    The Department of Health, Education and Welfare was
redesignated the Department of Health and Human Services in 1979.
Pub. L. 96-88, Title V, § 509(b), Oct. 17, 1979, 93 Stat. 695.
Eastern District of Pennsylvania seeking a declaration that the

loan it made to Dr. Crowe and Dr. Segal in 1989 was non-

dischargeable under section 523(a)(8).   After discovery was

completed, the Debtors filed a motion for summary judgment

requesting a dismissal of the adversary action with respect to

Dr. Segal because (1) he was not the student-debtor and had,

therefore, received no educational benefits and (2) the loan

itself was not the type of loan covered by section 523(a)(8).

Upon the court's suggestion that a determination of the second

issue in the Debtors' favor, i.e., that the loan was not an

educational loan, would resolve the claim against Dr. Crowe as

well, the motion was amended and brought on behalf of both

debtors.   Prior to the court's ruling on the motion and Santa

Fe's cross-motion which followed, we decided In re Pelkowski, 

(3d Cir. 1993), wherein we definitively resolved the

issue whether a non-student co-obligor may discharge a debt under

section 523(a)(8), without proving one of the statutory

exceptions, in favor of the creditor.5




5
 .    There are two statutory exceptions to the non-
dischargeability of a student loan which remain available to both
the student and non-student debtor, i.e., that the loan came due
more than seven years before the bankruptcy filing, 11 U.S.C.
§ 523(a)(8)(A), or that non-discharge of the debt would create
"undue hardship," 11 U.S.C § 523(a)(8)(B). In re Pelkowski, 

, 742 (3d Cir. 1993). The Debtors, however, do not
assert the applicability of either exception in this proceeding.
            The bankruptcy court found the debt dischargeable.6

Santa Fe appealed and the United States District Court for the

Eastern District of Pennsylvania affirmed.      This appeal followed.

We have jurisdiction pursuant to 28 U.S.C. § 1291 and 28 U.S.C.

§ 158(d).

            Our review of the district court's decision

"effectively amounts to review of the bankruptcy court's opinion

in the first instance."    In re Roth American, Inc., 

,

952 (3d Cir. 1992), quoting In re Sharon Steel Corp., 

, 1222 (3d Cir. 1989).     Insofar as this case turns on the

interpretation of a provision of the Bankruptcy Code, our review

is plenary.     

.   We review de novo the

bankruptcy court's order granting summary judgment.       In re

Pilcher, 

(9th BAP 1993).

                                 III.

            The question before us is one of statutory

construction.    Accordingly, we begin with the familiar canon that

the starting point for interpreting a statute is its plain

language, Mansell v. Mansell, 

, 588 (1989), although

6
 .    The bankruptcy court elected not to determine the
dischargeability of the debt as to Dr. Segal because its
determination that the Santa Fe loan did not represent an
educational debt within in the meaning of section 523(a)(8)
proved to be dispositive. Appellees argue that the circumstances
of this case, i.e., the nature of the loan and the timing of Dr.
Segal's co-execution, distinguish it from Pelkowski and that a
remand for further argument on the issue of dischargeability with
respect to Dr. Segal as co-obligor would be proper in the event
we decide section 523(a)(8) does not apply to the loan. Because
we will affirm the district court's determination that the loan
is dischargeable under section 523(a)(8), this issue is moot.
we hasten to note that in certain instances "plain language" can

be an oxymoron.    We have previously determined that where "the

terms of a statute [are] unambiguous, judicial inquiry is

complete except in rare circumstances."      Taylor v. Freeland &

Kronz, 

, 424 (3d Cir. 1991), aff'd, 

(1992), quoting Demarest v. Manspeaker, 

, 190 (1991).

Such circumstances are present only in the "rare" case where the

"literal application of the statute will produce a result

demonstrably at odds with the intentions of its drafters[,]" 

States v. Ron Pair Enterprises, Inc., 

, 242 (1989), or where the result would be "so bizarre that

Congress 'could not have intended' it."      

498 U.S. at 191.

          Title 11 of the United States Code, at section

523(a)(8), provides:
          (a) A discharge under section 727, 1141 or
          1128(a), 1228(b), or 1328(b) of this title
          does not discharge an individual debtor from
          any debt --

                             *   *   *   *

          (8) for an educational benefit overpayment
          or loan made, insured or guaranteed by a
          governmental unit, or made under any program
          funded in whole or in part by a governmental
          unit or nonprofit institution, or for an
          obligation to repay funds received as an
          educational benefit, scholarship or stipend
          . . .


11 U.S.C. § 523(a)(8) (1990).

          Despite our recent conclusion that the language of

section 523(a)(8) was unambiguous and that resort to legislative
history was, therefore, unnecessary, see 

, an analysis of the issues presented in this case cannot

avoid some discussion of the evolution of section 523(a)(8).

                               IV.

          The Bankruptcy Code was drafted to provide a discharge

procedure that enables insolvent Debtors to reorder their affairs

and enjoy "a new opportunity in life with a clear field for

future effort, unhampered by the pressure and discouragement of

preexisting debt."   Grogan v. Garner, 

, 286 (1991),

quoting Local Loan Co. v. Hunt, 

, 244 (1934).     But

Congress elected to exclude certain obligations from the general

policy of discharge where the public policy at issue outweighs

the debtors need for a fresh start.   See 

; In re Merchant, 

, 740 (6th Cir. 1992).    Among

the exceptions, which are to be narrowly construed against the

creditor and in favor of the debtor, 

,

is the proviso in section 523(a)(8) that educational loans be

non-dischargeable.

          When originally enacted in 1978, section 523(a)(8)

referred only to obligations "to a governmental unit, or a

nonprofit institution of higher education for an educational

loan."   Bankruptcy Reform Act of 1978, Pub. L. No. 95-598,

92 Stat. 2549 (1978).   Clearly under that version of the statute,

the debt to Santa Fe would be dischargeable, regardless of its

classification as an educational loan.   Santa Fe is neither a

governmental unit nor a nonprofit institution of higher

education.
          The subsection was amended in 1979 to include

"educational loan[s] made, insured or guaranteed by a

governmental unit, or made under any program funded in whole or

in part by a governmental unit, or a nonprofit institution of

higher education."     Act of August 14, 1979, Pub. L. No. 96-56,

§ 3(1), 93 Stat. 387 (1979) (amending 11 U.S.C. § 523(a)(8)

(Supp. 1979)).     The debt at issue in this case still would have

been dischargeable, as the loan by Santa Fe was not made, insured

or guaranteed by a governmental entity.

          Section 523(a)(8) was again expanded by section

454(a)(2) of the Bankruptcy Amendment Act of 1984, wherein the

clause "of higher education" was deleted to eliminate the

inference that the section applied only to nonprofit institutions

associated with higher education.     Bankruptcy Amendments and

Federal Judgeship Act of 1984, Pub. L. No. 98-353, Title III,

§ 454(a)(2), 98 Stat. 333 (Supp. 1984) (amending 11 U.S.C.

§ 523(a)(8) (1982)).    As a result of the 1979 and 1984

amendments, educational loans made by commercial, for-profit

institutions were non-dischargeable if they were insured or

guaranteed by a governmental entity, or if the loans were made

pursuant to an educational lending program involving a nonprofit

institution.     See In re Merchant, 

(6th Cir. 1992)

(loan made by commercial bank was assigned to a nonprofit

university pursuant to an agreement by the university to purchase

all defaulted student loans); In re Pilcher, 

(9th

B.A.P. 1993) (nonprofit entities, while not involved in the

debtor's particular loan, were involved in the program by which
the loan was made).   Likewise, educational loans made by

nonprofit institutions became dischargeable if they were made as

part of an educational loan program.    In re Roberts, 

(C.D. Ill. 1993) (educational loan by a nonprofit credit union

pursuant to an established educational loan program held to be

non-dischargeable).

          Subsection 523(a)(8) was yet again expanded by the

Crime Control Act of 1990.7   The revised statute made

non-dischargeable educational benefits and overpayments as well

as educational loans, and increased from five to seven years the

time interval in section 523(a)(8).    Most relevant to this case,

however, was the addition of language which prohibited the

discharge of "an obligation to repay funds received as an

educational benefit, scholarship, or stipend."   Crime Control Act

of 1990, Pub. L. No. 101-647, § 3631(a), 104 Stat. 4865 (1990)

(amending 11 U.S.C. § 523(a)(8) (1984)).   As discussed below,

Santa Fe suggests that the debt here represents such an

obligation.




7
 .    The effective date of these amendments was 180 days from
November 29, 1990, the date of enactment. Crime Control Act of
1990, Pub. L. No. 101-647, §§ 3621, 3631, 104 Stat. 4789,
4964-4965, 4966 (1990). Because this case was filed in April
1992, the amendments are applicable.
                                  V.

             Santa Fe raises two contentions in its effort to

persuade us that the Debtors' loan obligation is non-

dischargeable under section 523(a)(8).

                                  A.

             Santa Fe initially claims that the obligation

represents a debt for an "educational benefit overpayment or loan

. . . made under any program funded in whole or in part by a

governmental unit or nonprofit institution," focussing almost

exclusively on whether the loan to Dr. Crowe in 1989 was made

"under any program."

             For this argument to prevail, Santa Fe would first have

to establish that the loan to Dr. Crowe was for "educational

purposes."    In re Shipman, 

(Bankr. W.D. Mo. 1983).

But even if we were to assume, as the bankruptcy court did, that

the loan from Santa Fe to Dr. Crowe was an educational loan, our

analysis would not end there.     Under both the former and present

versions of section 523(a)(8), it is insufficient for purposes of

establishing non-dischargeability that a nonprofit institution

make an educational loan; instead, the loan must also have been

made pursuant to some program.    See Pub. L. Nos. 96-56, § 3(1),
93 Stat. 387 (1979); 98-353, § 454(a)(2), 98 Stat. 333 (Supp.

1984); and 101-647, § 3631(a), 104 Stat. 4865 (1990).        Although

Santa Fe now claims that it and the Debtors created a program

that was carefully outlined in the Employment Contract and the

promissory note, that is not enough, for the record is devoid of

evidence that the loan was made under any program funded in whole
or in part by either Santa Fe (a nonprofit institution) or a

governmental entity.   Santa Fe did not make a practice of buying

out student debt to obtain employees, nor did it have procedures

in place for making such arrangements.    As far as we can tell,

this was a unique, unprecedented arrangement created specifically

to facilitate the acquisition of Dr. Crowe as a staff physician.

          Santa Fe argues alternatively that educational benefits

and loans need not be made pursuant to a program to be non-

dischargeable under section 523(a)(8).    In support of its

argument, Santa Fe relies upon In re Najafi, 

(Bankr.

E.D. Pa. 1993), wherein the court concluded that an obligation

for an educational benefit, although not made pursuant to a

program was, "at least to some extent," within the scope of

section 523(a)(8) because the debtor received an "educational

benefit" which he failed to pay for.     

.

The Najafi court held non-dischargeable a former student's

obligation to Cabrini College in Radnor, Pennsylvania, despite

the fact that the college "was not adhering to its normal

policies" when it allowed the debtor to register and attend

classes without first paying his tuition in full.    The court

determined that it was "fair . . . to decide the debtor's

liability to Cabrini on an equitable basis rather than by

strictly applying the policies set forth in Cabrini's catalogue."

          In Najafi, however, the court first determined that the

advance of credit constituted an "educational loan."    Although

the court later noted that the college deviated from its normal
practice in admitting Najafi without advance payment, the

question was not raised whether the loan constituted a part of

the school's overall financial aid program.     In the present case,

there clearly was no educational loan "program"; rather there was

the single loan made to Dr. Crowe.     To the extent that Najafi

could be interpreted as not requiring a "program," we reject its

reasoning as inconsistent with the statute.

                                  B.

             Santa Fe's principal contention focusses on the 1990

amendment to section 523(a)(8), which rendered non-dischargeable

an "obligation to repay funds received as an educational benefit,

scholarship, or stipend."    Implicit in Santa Fe's argument is the

assumption that any lender -- commercial or nonprofit -- which

provides funds which, in turn, are used to repay an educational

loan obligation, a fortiori, has provided "funds received as an

educational benefit . . . ."    This argument must fail, however,

because as we have already noted, the only educational benefits

or stipends provided to Dr. Crowe were provided by the NHSC and

not by Santa Fe.

          Moreover, as the bankruptcy court correctly noted,

Santa Fe's interpretation of section 523(a)(8) is overly broad.

Under its interpretation, if Dr. Crowe had repaid the NHSC from a

combination of her savings and a personal or unsecured commercial

loan (e.g., a credit card cash advance), the personal or

commercial loan would be non-dischargeable under the 1990

amendment.    But the language of the subsection simply does not

support the proffered construction.     Santa Fe might stand on
firmer ground if, for instance, section 523(a)(8) referred to "an

obligation to repay funds received as or used to repay an

educational benefit, scholarship, or stipend."   Clearly, though,

Congress did not enact such a provision, and neither the plain

language of the 1990 amendment nor the policies which underlie

the subsection support such an interpretation.

                               VI.

          Although limited, the legislative history of

section 523(a)(8) teaches that the exclusion of educational loans

from the discharge provisions was designed to remedy abuses of

the educational loan system by restricting the ability of a

student to discharge an educational loan by filing for bankruptcy

shortly after graduation, and to safeguard the financial

integrity of educational loan programs.   See, e.g., 124 Cong.

Rec. 1791-98 (1978); 

.   By enacting

section 523(a)(8), Congress sought principally to protect

government entities and nonprofit institutions of higher

education -- places which lend money or guarantee loans to

individuals for educational purposes -- from bankruptcy

discharge.   Because such loans are not based upon a borrower's

proven credit-worthiness, and because they serve a purpose which

Congress sought to encourage, section 523(a)(8) protects the

lender when a borrower, who often would not qualify under

traditional underwriting standards, files a chapter 7 bankruptcy.

See In re 

.
          In its continuing effort to prevent such abuses and to

protect the solvency of educational loan programs, Congress
passed a series of amendments to section 523(a)(8) which extended

its reach from educational loans to educational benefits.       The

amendments also extended the protection afforded under section

523(a)(8) to any lender, in certain limited circumstances.

Metaphorically speaking, the modification process not only

expanded subsection (8) to catch more fish in its non-

dischargeability net, but has also narrowed the subsection to

keep them from escaping.    Epstein, Nickles & White, BANKRUPTCY:

PRACTITIONER TREATISE SERIES, Vol. 2, § 7-33. at 395 (West 1992).

Despite the expansive amendments, however, section 523(a)(8)

still does not reach the particular type of loan at issue in this

case.

          Santa Fe urges us to consider the purpose of the funds

received instead of the purpose of the parties in determining the

type of the loan it made to Dr. Crowe.     It cites In re Ealy, 

(Bankr. C.D. Ill. 1987) for the proposition that "[t]he

test for determining whether a loan is a student loan is whether

the proceeds of the loan were used for 'educational purposes.'"

, quoting In re Vretis, 

, 157

(Bankr. M.D. Fla. 1985).    But we ask ourselves:    how far can the

term "educational purposes" be stretched?     Santa Fe did not

provide to Dr. Crowe a means to obtain an education in exchange

for the loan.   The "purpose" here was not to facilitate Dr.

Crowe's education, which had long since been completed; instead,

and this is undisputed, the purpose of the funds was to       induce

Dr. Crowe to accept employment with Santa Fe by providing her

with a means to repay her obligation to the NHSC, an obligation
which arose as a result of a scholarship.    That said, however,

Santa Fe asks us to go further.   It contends that in addition to

determining the purpose of the loan, we must determine the nature

and character of the debt.   Here, Santa Fe relies on Pelkowski,

wherein we noted that "the focus of section 523(a)(8) is on the

nature and character of the loan, not how the recipient actually

spent the money."   

, quoting In re

Roberts, 

(C.D. Ill. 1993).

          We believe the record amply supports the bankruptcy

court's finding that the loan made by Santa Fe to Dr. Crowe had

the nature and character of a buyout.     It was made solely for the

purpose of securing her services and, as such, cannot be fairly

characterized as an educational loan or benefit.8
8
 .    This case does not involve loan consolidations, which
courts routinely have viewed as "educational loans," within the
meaning of 11 U.S.C. § 523(a)(8). There is even a federal
statute permitting such educational loan consolidations. See 20
U.S.C. § 1078-3. Several courts have determined that
consolidation loans meet the § 523(a)(8) definition and that the
date of the consolidation loan starts the running of the
seven-year limit of § 523(a)(8)(A). See Hiatt v. Indiana State
Student Assistance Comm'n, 

, 25 (7th Cir. 1994) ("We
conclude that, in cases in which a debtor has consolidated her
educational loans pursuant to 20 U.S.C. § 1078-3, the plain
language of section 523(a)(8)(A) requires that the
nondischargeability period commences on the date on which the
consolidation loan first became due."), cert. denied, 

(1995); Martin v. Great Lakes Higher Educ. Assoc., 

, 772 (Bankr. W.D. Mo. 1992) ("[T]he court finds the
consolidation loan is an educational loan covered by 11 U.S.C.
§ 523(a)(8)(A) . . . . The consolidated loan is nondischargeable
because it first became due less than five years before the
bankruptcy filing."); see also In re Roberts, No. 91-7241, 

, at *3 (D. Kan. May 19, 1993) ("The court . . . agrees
with the majority of courts deciding this issue and concludes
that the date the debtor's consolidated loan first became due is
the date for determining dischargeability under § 523(a)(8)(A).".
          Furthermore, we do not find the loan "similar in nature

to [a] student loan."   See Appellant's Br. at 19, quoting 136

Cong. Rec. H13288.   Although the loan was made by a nonprofit

institution, was unsecured and was used to repay an obligation

incurred in return for an educational benefit, nothing in the

express language or the legislative history of section 523(a)(8)

convinces us that Congress intended for loans such as the one at

issue here to be non-dischargeable in a chapter 7 bankruptcy.

          Moreover, in light of what we have determined to be the

intended purpose of section 523(a)(8), it is also significant

that whether or not Santa Fe is ultimately repaid by the Debtors,

neither the federal treasury, the solvency of the NHSC nor the

public service obligation of Dr. Crowe will be affected.    The

debt to the educational lending program has been repaid and the

service obligation has been deemed fully satisfied.   See

Appellant's App. at 230a-31a.   Furthermore, we agree with the

bankruptcy court's observation that to the extent this decision

might be interpreted as discouraging the refinancing of

educational debt (a position advanced by Santa Fe which we

consider to be of dubious merit), the purposes of section

523(a)(8) will not be frustrated.

                                VII.

          For the reasons set forth above, we conclude that the

loans made pursuant to the terms of an employment contract which

are used, in turn, to repay educational debt are not, themselves,

non-dischargeable educational loans within the meaning of
11 U.S.C. § 523(a)(8).   Accordingly, we will affirm the judgment

of the district court.
_________________________