Legal Education

Public service attorneys in loan-forgiveness suit still could face rejection, experts warn

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In late February, a federal court reversed and remanded U.S. Department of Education determinations that three out of four lawyers—two of whom worked for the American Bar Association—did not qualify for the Public Service Loan Forgiveness program. Whether they will ultimately have their student loans discharged remains to be seen, say administrative law attorneys.

In writing his Feb. 22 memorandum opinion, U.S. District Judge Timothy J. Kelly found that when the department changed its interpretation of the regulation, it did not adhere to notice standards mandated under the Administrative Procedure Act, and those changes were arbitrary and capricious.

“I do not think DOE will change its mind on remand,” says Linda Jellum, a professor at the Mercer University School of Law and chair-elect of the ABA Section of Administrative Law & Regulatory Practice. “Rather, I think DOE will complete the process the way it should have done the first time—by offering a reasoned explanation for its changed interpretation.”

Part of the College Cost Reduction and Access Act of 2007, people who may qualify for the PSLF program are employed by government or nonprofit organizations, according to the DOE’s federal student aid website. That includes people who work for nonprofit employers designated as tax-exempt under section 501(c)(3) of the Internal Revenue Code. The program also applies to nonprofit groups without 501(c)(3) status, as long as their primary purpose is to provide specific types of qualifying services.

For individuals to be eligible for the program, they must work in public service for 10 years and make 120 qualifying loan payments after Oct. 1, 2007. Jobs with labor unions, partisan political organizations and for-profit groups do not qualify.

The ABA and four individual plaintiffs, all of whom are lawyers, originally filed in the U.S. District Court for the District of Columbia in December 2016. Between 2012 and 2014, the individuals received letters confirming eligibility for the PSLF program, but by 2016, all were notified that the determinations were reversed because their employers did not provide a qualifying service.

Geoffrey Burkhart, one of the three plaintiffs whose denial letters were remanded to the DOE by Judge Kelly, joined the ABA in 2014 as an attorney and project director with the Division for Legal Services before becoming deputy director with the ABA Center for Innovation. Between 2009 and 2017, Burkhart estimated that his federal student loans had grown from less than $156,000 to more than $200,000. He is now the executive director of the Texas Indigent Defense Commission.

Jamie Rudert, an individual plaintiff who worked at Vietnam Veterans of America in 2012, followed by a position with Paralyzed Veterans of America, was denied his summary judgment motion on the basis that the record does not support his claim. With both jobs, he represented veterans in disability benefit appeals, the opinion states. He estimated that his federal student loan balance grew from $134,808 in August 2012 to $161,985 in May 2017.

“I am personally disappointed by the court’s ruling as it pertains to my case, and I am carefully evaluating all my options going forward,” Rudert said in a statement to the ABA Journal.

Also, the court granted a defense summary judgment motion against the ABA, finding that the DOE determination that the ABA was not a public service organization in regards to the PSLF program was not a final agency action. So the APA requirements don’t apply.

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Jack Rives, executive director of the ABA, says the ABA is considering all its options. He sees the Feb. 22 court finding as positive news.

“We’re evaluating the decision in which the court ruled that the ABA doesn’t have standing in this case. I will say that I believe that’s fundamentally wrong. The ABA’s position has always been that we should be in the position where we can protect the interests of our staff; that’s consistent with a plain reading of the law,” says Rives, adding that the parties have 60 days from the published opinion to file an appeal.

“Some other bar association leaders have talked to me about the potential impact [of the case] but relatively few,” he told the Journal.

Like Jellum at Mercer University, Ashley C. Parrish, an administrative law and appellate partner at King & Spalding in Washington, D.C., thinks it is possible that the DOE will again find that all the individual plaintiffs do not qualify for the PSLF program.

He mentions a footnote in the memorandum opinion, which states that although the parties agreed that the primary purpose and school-like setting standards represent the DOE’s interpretation of its own regulations, the briefs did not squarely address the type of agency action the department used to adopt the standards. Because the court found that the department departed from past practices without meeting procedural requirements of the APA, it did not have to be determined what specific action the agency took when adopting the standards, Kelly wrote in his opinion.

That shows there likely will be more litigation, according to Parrish.

“It also raises an interesting question,” he says. “In a situation where statutes and regulations have been interpreted broadly and reliance interests are at stake, are agencies stuck with the broad interpretation, or do they have flexibility to narrow their interpretation as long as a reasoned explanation is provided?”

Jay Urwitz, who was the DOE’s deputy general counsel from 2015 to 2017, says the PSLF program is meant for workers who directly provide services, such as police officers, teachers, government employees, public defenders and some public health professionals.

“That’s what separates out something like Lawyers Without Borders, whose whole purpose is to provide services to the needy, from the ABA,” says Urwitz, who now has senior fellow positions at the Center for American Progress and the American Council on Education. “You don’t want someone working at the ABA who takes my Mastercard when I make a purchase to get PSLF. Validating who at the ABA primarily performs public service and who does not would take a huge amount of department effort.”

However, he does think the prevailing individual plaintiffs, and those similarly situated, who were at one point told they were qualified, eventually will have their student loans discharged to some degree.

“It’s great news for those people who were told early on that they qualified when in fact they did not. But I’m not sure how many of them there are,” Urwitz says.

Going forward, good communication could help ensure that the PSLF program is correctly administered, says Heather Jarvis, a lawyer in the Wilmington, North Carolina, area who provides educational resources and training for student loan borrowers.

“Affected employers and borrowers should engage with Department of Education decision-makers so that a well-reasoned standard can be developed,” she told the Journal in an email.

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