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US Department of Education denies reneging on attorneys’ loan forgiveness

The U.S. Department of Education has distanced itself from the company it hired to administer loan services in response to a lawsuit alleging the federal agency has refused to honor loan forgiveness commitments.

The American Bar Association filed suit in December alleging the department failed to provide a reasonable explanation for why it has decided to refuse to honor loan forgiveness commitments made to attorneys engaged in public interest law and other public service jobs.

But the Department of Education, in a response filed March 23, said the contractor charged with vetting student’s employment confirmation forms for eligibility in the Public Service Loan Forgiveness program, FedLoan Servicing, made the decision on its own and does not speak for the agency.

FedLoan says on its website that it was established to service student loans owned by the federal government.

“FedLoan Servicing response to the ECF does not reflect a final agency action on the borrower’s qualifications for PSLF,” the filing states. “…(Approval) of an ECF does not reflect agency action on the borrower’s qualifications for the PSLF Program.”

Linda A. Klein, the ABA’s president, called the response “bewildering” in an interview with The Daily Record on Tuesday.

“This is the company that they hired, they admit they have a contract with them yet they refuse to accept responsibility,” she said.

The ABA lawsuit named four individual plaintiffs affected by the agency’s decision, all law school graduates with six-figure student loan debt who entered public service with the promise from the federal government that, if they made timely loan payments for 10 years, their remaining debt would be forgiven.

But the ABA claims the department abruptly changed the eligibility requirement under the Public Service Loan Forgiveness program so the plaintiffs and many other graduates are no longer eligible for the program, enacted in 2007. The denials of eligibility began a few years ago “in advance of the date that the first set of loans would be forgiven,” according to the lawsuit, which was filed in U.S. District Court for the District of Columbia.

The department, in its response, admitted it encouraged borrowers to submit ECF forms every year to show program participants were in qualifying, public-interest jobs and were making their monthly loan payments.

“The Department contracts with FedLoan Servicing to perform certain services in regard to the loans of borrowers who submit ECF forms and PSLF applications to the Department,” the court filing states. “Defendants admit that the Department has the ultimate authority to review FedLoan Servicing’s actions under its contract.”

‘Bait-and-switch’

Klein described the agency’s actions as a “bait-and-switch” that hurt people who made life-altering choices based on the agency’s decisions, which have now been reneged.

“What more could they have done?” Klein said.

The change also harms the ABA’s ability to attract and retain employees, according to the organization’s lawsuit. The program was a major attraction to jobseekers, and many ABA employees will “struggle” to continue working at the organization without future loan forgiveness, the lawsuit states.

The ABA alleges the department’s new interpretation of the program’s provisions violates the Administrative Procedure Act because no reasonable interpretation would exclude the plaintiffs’ public interest jobs or employment with the ABA from the scope of “public service jobs” that qualify for loan forgiveness.

The problem is likely not limited to lawyers, Klein said, as the loan forgiveness program extends to people in other forms of public interest work. As the ABA moves forward with litigation, it expects to get a better sense of who else may be affected, she added.

Three of the plaintiffs — Geoffrey Burkhart, Jamie Rudert, and Kate Voigt — had received confirmation from the department that they qualified for the program as long as they continued to work full-time in their public interest law jobs and make monthly loan payments. The fourth, Michelle Quintero-Millan, believed she would qualify for loan forgiveness because her work fell under the public service umbrella and because the department had already certified her employer, the ABA’s South Texas Pro Bono Asylum Representation Project, as a qualified, according to the lawsuit.

The case is American Bar Association et al. v. United States Department of Education, 1:16-cv-02476.


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