Federal judge rules for public service attorneys in loan forgiveness lawsuit News
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Federal judge rules for public service attorneys in loan forgiveness lawsuit

A judge for the US District Court for the District of Columbia on Friday held that the US Department of Education’s (DOE) reversal of certain determinations under the federal Public Service Loan Forgiveness (PSLF) program, made before the borrowers’ completion of all 120 monthly loan payments, did not adhere to notice standards mandated under the Administrative Procedure Act (APA), and was “arbitrary and capricious.”

The PSLF Program, established by Congress in 2007, offers federal student loan forgiveness for those who make 10 years, or 120 months, of monthly loan payments while employed in public service. Upon receipt of an Employment Certification Form, the DOE determines whether the borrower’s loan payments were made while employed at a qualifying “public service organization,” such that they count towards the PSLF program’s requirements.

In this case, the American Bar Association and four lawyers brought five claims against DOE’s reversal of certain determinations under the PSLF Program, four of which are brought under the APA. The court supported the plaintiffs’ first claim and concluded that the court need not to consider whether the DOE failed to satisfy the APA’s notice requirements, failed to comport with the PSLF program’s authorizing statute, or applied regulatory changes in an impermissibly retroactive manner to grand summary judgment for the plaintiffs.

According to the opinion, internal communication between the DOE and FedLoan Servicing supports the plaintiffs’ assertion that the DOE changed its interpretation of the regulation before it issued the denial letters. The court concluded that the DOE acted “arbitrarily and capriciously when it reversed its interpretation of the PSLF regulation without displaying awareness of its changed position, providing a reasoned explanation for that decision, and taking into account the serious reliance interests affected.” The court also ordered the DOE to vacate the new standards on which it relied when it sent denial letters to the plaintiffs.