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US Department of Education takes new tack in attorneys’ loan forgiveness lawsuit

(iStock/aluxum)

(iStock/aluxum)

The U.S. Department of Education has a new argument in its defense against allegations it is refusing to honor loan forgiveness commitments made through a program for attorneys engaged in public interest law: no one currently is eligible to apply.

The Department of Education claims its Public Service Loan Forgiveness Program will certify employers and forgo the remaining balance of a borrower’s student loans only if the borrower has made 120 payments after Oct. 1, 2007 while working at a public service organization. Until then, borrowers should check in with the agency periodically to make sure their employer is eligible for the program, but that is not official until the program is around for 10 years, according to its combined motion for summary judgment and response to the ABA’s motion for summary judgement filed earlier this week.

“Because less than ten years have passed since the program’s creation and no borrowers have yet made the required 120 payments, no one is yet eligible to apply for forgiveness under the PSLF, including the individual plaintiffs,” the Department of Education states in its motion.

Borrowers can get “provisional guidance” on whether they are eligible for the program, the agency added. First, borrowers file an employment certification form. Then, FedLoan Servicing, a company hired by the government to administer the program, tells the borrower whether his or her employer qualifies under the program.

In March, however, the Department of Education distanced itself from FedLoan Servicing, saying it makes decisions on its own and does not speak for the agency.

The ABA’s lawsuit names 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 department abruptly changed the eligibility requirement under the Public Service Loan Forgiveness program, the ABA alleges, so the plaintiffs and many other graduates are no longer eligible for the program, enacted in 2007.

“The plaintiffs followed the rules and are now paying a steep price for the department’s mistakes,” ABA President Linda Klein said in a statement this week in response to the Department of Education’s motion. “The department now requires participants to make loan payments for 10 years, then wait to see if they qualify for loan forgiveness. The department minimizes both their errors and the price paid by the plaintiffs for those mistakes. That’s unfair. We intend to hold the department accountable.”

The Department of Education argues that it did clarify the rules of the loan forgiveness program after it was enacted, saying an employer can qualify for the program based on certain guidelines that examine the nature of the organization’s work, not necessarily the borrower’s job description.

The ABA was one of the employers later found ineligible for the loan forgiveness program by the Department of Education. The association’s lawsuit says the change in status harms its ability to attract and retain employees. 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 complaint states.

“The Department reviewed the evidence submitted to it on behalf of the ABA, and has tentatively determined that the evidence currently before it does not demonstrate that the ABA’s primary purpose is public service work,” the Department of Education stated in its motion for summary judgment. “If the Department ultimately makes a final determination that the ABA does qualify, all of its employees regardless of their job function will work for a qualifying employer for purposes of the PSLF Program.”

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


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