The American Bar Association’s Public Interest Law services have suffered so much since their eligibility for the government’s Public Service Loan Forgiveness program was revoked that the bar engaged a private law firm to challenge the reversal in federal court.
“The ABA has had a tough time recruiting recent law graduates to provide pro bono legal services because these graduates can no longer count on the promise of their student loans being forgiven under the PSLF program,” said John Dey, associate at Ropes & Gray, the Washington, D.C., law firm representing the ABA and four borrowers who sued the Department of Education over the PSLF.
The program forgives the remaining balance of student loans if the borrower has made 120 qualifying payments after October 1, 2007, towards the debt while employed at a qualifying public service organization.
No one is yet eligible to apply for forgiveness under the PSLF, according to the department, because less than 10 years have passed since the program’s creation.
“The American Bar Association has been losing staff pretty steadily, particularly those that provide pro bono legal services to immigrants along the U.S./Mexico border in Texas, since the department started issuing its denials,” Mr. Dey told PacerMonitor in a telephone interview.
In the lawsuit, recent law school graduates Geoffrey Burkhart, Michelle Quintero-Millan, Jamie Rudert and Kate Voigt allege they were turned away after originally being told they qualified.
“This has been devastating for the ABA’s public service operations,” said Mr. Dey. “Our clients are hoping for a quick resolution so that recent graduates will once again be able to pursue public interest work without fear of having their eligibility for loan forgiveness revoked.”
Filed in the U.S. District Court for the District of Columbia, the American Bar Association v U.S. Department of Education complaint alleges the department misled the plaintiffs, now carrying six figures in law school student loan debt, and their employers to believe they were working in qualifying jobs on track for loan forgiveness but with no warning and no coherent explanation, the Department then changed its mind.
“This is a case that in part tests whether someone who makes significant sacrifices and follows the rules can trust the government to keep its word when it promises a benefit,” said Mr. Dey.
Although each of the individual plaintiffs was reportedly working in a position that served disabled and aging Vietnam-era veterans, immigrants and U.S. public defender systems in some capacity, Mr. Dey claims the department did not explain why the organizations didn’t qualify based on the service they provide.
“The plaintiffs were told that their years of public service counted for naught, their debt loads continued to mount, and their hopes of future financial security were suddenly dashed,” wrote Ropes & Gray partner Chong Park about the department in the complaint signed on December 20, 2016.
A hearing on summary judgment motions was to take place on Oct. 6, but it was postponed after the case was reassigned to a newly commissioned judge named Timothy J. Kelly.
Another lawsuit involving student loans and the Department of Education was filed in 2014 in the Northern District of Illinois Eastern Division.
Although the Department of Education is not specifically named as a defendant in Consumer Financial Protection Bureau (CFPB) v. Corinthian Colleges, Inc., the CFPB claims that the Department entered into an operating agreement with Corinthian to establish a reserve fund of not less than $30 million to be used exclusively for student refunds after Corinthian failed to provide the department with satisfactory information regarding job placement. However, no reserve fund was established. Further, it was alleged that Corinthian prevented enrolled students from completing their course of study as well as misrepresented career prospects and career services available to Corinthian students and prospective students in order to induce them to enter into Genesis Loans.
On October 27, 2015, U.S. District Judge Gary Feinerman entered a judgment for equitable monetary relief in favor of the Bureau and against defendant Corinthian in the amount of $531,224,267 based on claims by the Bureau that Corinthian violated the CFPA’s prohibition on deceptive and unfair practices.
“In our case, the department has not followed the proper procedures in changing its interpretation of relevant provisions of the PSLF statute and regulation and it failed to provide the required notice before doing so,” Mr. Dey said.
U.S. Department of Justice (DOJ) spokeswoman Nicole Navas Oxman declined to comment on the ABA lawsuit but sent an email attachment called Memorandum of Points and Authorities in Support of Defendant’s Motion for Summary Judgment, which states that although the department’s contractor has made occasional errors in individual notifications to borrowers and corrected those errors, the plaintiffs mischaracterized notices of provisional guidance as final agency action and are attempting to create changes in agency policy where there are none.
The July 31, 2017, memo, signed by Julie S. Saltman, trial attorney with the DOJ Civil Division, states the department has provided borrowers, and organizations like the ABA, ample opportunity to seek reconsideration of its decisions.
“Accordingly, plaintiffs’ claims lack merit and the Court should grant summary judgment in defendants’ favor,” wrote Ms. Saltman who has since been replaced by Counselor Chetan Patil.
The ABA’s claim stops short of alleging fraud and instead invokes the Administrator Procedure Act (APA) as a cause of action to challenge the government agency’s actions.
“We’re seeking declaratory relief that the Department of Education properly interpret the statute and its own regulation,” Mr. Park told PacerMonitor News in a phone interview. “If the Court rules in favor of the Department, the status for lots of borrowers would be thrown into more uncertainty, especially those graduates who work for nonprofits that are not 501(c)(3) organizations.”
The APA governs how administrative agencies of the federal government may propose and establish regulations.
The challenge the plaintiffs face is in proving there wasn’t some later step in the eligibility process that the department was still waiting to take.
“Final agency action is a threshold question the court must address in APA cases before turning to the full merits,” said Mr. Dey. “The department appears to take the position that no such action takes place until a borrower files an application for loan forgiveness at the end of 10 years. This means that no one would be able to challenge a denial before the end of that period. We disagree.”
Some 611,598 borrowers have one or more approved PSLF Employment Certification Forms (ECF) and could be impacted by the ruling, according to FedLoan Servicing via studentaid.ed.gov.
Adding fuel to the fire of uncertainty is the Trump administration’s reported proposal to end PSLF so that there would be no new borrowers on or after July 1, 2018.
“We are trying our best to ensure that the determinations borrowers received from the Education Department are honored in good faith,” Mr. Park said.
If not, although free to pursue private sector positions, many graduates who had hoped to work off their debt while serving the public interest might instead be footing the bill themselves.