Earlier this year the DOE mostly lost a lawsuit against the American Bar Association about PSLF. In that case, the government lost because it didn’t play by its own rules when it changed some complicated details about case-by-case employment approvals and then tried to inflict those changes retroactively on borrowers. It was pretty blatant and they lost.
In other news, I’m a doctor and not a lawyer, so that’s my personal layman’s take.
Anyway, the American Federation of Teachers just sued the DOE as well. But this one is a much tougher sell. Here’s the actual complaint. Their argument? That the government-contracted servicers did an egregiously bad job managing students’ loans and misled borrowers to such an extent that the government should be held liable for their servicer’s mistakes and bound to make serious changes to the administration of the program in order to uphold its original intent.
Pages of Tears
The claims are certainly factually true and seem reasonable in a common-sense way. Reading these Kafkaesque stories of blatant, repeated, and irredeemable bureaucratic failure is as outrage-inducing as it is depressing. There’s no doubt that the administration of loan servicing in general and PSLF specifically is not what Congress had in mind when it passed the bill. The government servicers have done a terrible job across the board, but especially so when it comes to helping borrowers navigate income-driven repayment and PSLF. This is not helped in any way by the fact that formal guidance was really limited from the department itself for the first several years of the PSLF program. The first ECF wasn’t even available until five years in.
It’s comparatively easy for more recent graduates and pundits to roll their eyes at all these teachers and the other 99% of folks rejected in that first batch of PSLF applicants and point out that they didn’t qualify. Of course they didn’t! But the argument is that we are effectively punishing citizens who could have otherwise earned a rare entitlement for trusting what they reasonably believed was official advice.
Ultimately–generalized day-to-day incompetence aside–the problem is that all of these borrowers who are angry about not qualifying for PSLF in fact do not qualify for PSLF. They didn’t do the right things. Some have the right loans but used the wrong payment plan (the issue that was temporarily addressed when Congress passed the temporary “TEPSLF” expansion). But Congress has not attempted to address the “wrong loan” (usually FFEL) component nor made changes to how the program or loan servicing is handled that could address the disaster on the ground. For her part, secretary Betsy “I’ve-never-visited-a-school” DeVos‘s solution was to try to give all of the business to one unqualified company instead of several and put her friends at Navient (current defenders of a federal lawsuit for sucking) in the shortlist (fwiw, that proposal mercifully died).
The Crux of the Case
So back to this lawsuit. The crux of the suit hinges on the argument that the Department of Education is responsible for the servicer’s incompetence, and basically argues that all borrowers deserve PSLF if they were misled by one of the contracted federal loan servicers.
And that takes us to the recent lawsuit that the department mostly lost against the ABA. I say mostly lost, because of the various counts brought against the department, the DoE did win a key victory. In a case where the servicer made a mistake and incorrectly approved a borrower’s ECF (employment certification form), the Department of Education fixed the mistake years later and removed years of PSLF eligibility from someone who thought they were in great shape. This was deemed totally kosher by the court. As long as the mistake was not a final agency action, the government wasn’t held responsible for fixing a “contractor’s error.”
These PSLF denials are not a matter of the posthoc rule changing the DoE lost about earlier this year. The relevant rules haven’t changed, and people are largely correctly rejected (with the exception of FedLoan’s inexplicable inability to count as high as 120). It’s basically a matter of abysmal customer service. And terrible customer service may not be enough.
From the ABA suit decision:
Moreover, although the Department previously confirmed to [the plaintiff] that his employment was eligible, an agency’s attempt to correct a “mistake in interpreting and applying its own recently promulgated regulations” does not necessarily trigger the APA’s prohibition on retroactive rules.
So, with the repeated caveat that I’m totally not a lawyer, it’s going to be a tough sell to convince the court that the bad actions and terrible advice from servicers should mandate a broad rewriting of the program architecture or large swath of additional forgiven loans. It’s probably going to rely on a really sympathetic ear who wants to go out of their way to favor the plaintiff.
However, even if it fails, this case may still be a good PR move to stoke some high-visibility outrage. It would be more likely for these issues to be fixed by another act of Congress than for the court to swoop in and save the day. Though, along those lines, even the administration of another temporary expansion would be no small logistical feat given the slow-motion trainwreck that is FedLoan Servicing.