Loan Forgiveness Program Lawsuit

Winnie Tsao – April 4th, 2017

 In response to a lawsuit from the American Bar Association, the U.S. Department of Education appears to be arguing that it has never issued any approval to participate in its Public Service Loan Forgiveness program.

The PSLF program, authorized by federal law in 2007, permits certain people who work in nonprofit and public service jobs to have their student loans forgiven. Participants must work at a 501(c)(3) nonprofit or provide certain services to qualify, including “public education.” After 10 years in those jobs and 120 on-time payments on their student loans, participants can have the balance of their loans forgiven. The first loan forgiveness could be as early as October of this year.

Name plaintiff Geoffrey Burkhart, who at the relevant time worked for the ABA’s Standing Committee on Legal Aid and Indigent Defendants, alleged in the lawsuit that he’d received confirmation in 2014 that his ECF was accepted. Before taking the job, in fact, he confirmed eligibility with both the ABA and the loan servicer, FedLoan Servicing. FedLoan Servicing later sent him a letter accepting his ECF, which was attached to the lawsuit as an exhibit.

But more than two years later, the complaint says, FedLoan Servicing sent Burkhart a letter saying the ABA “do[es] not provide a qualifying service,” and therefore his participation in the PSLF program was revoked after “further research and after consulting with the department.” That means Burkhart’s 2.5 years of loan payments will not count toward loan forgiveness, despite the initial assurances of FedLoan Servicing.

The Department of Education’s answer denies that Burkhart’s ECF had ever been approved, or that its letter revoking his participation was a reversal.

In a message to ABA staff Monday, ABA Executive Director Jack Rives said the DOE is suggesting that FedLoan Servicing’s decisions are meaningless, and that participants in the PSLF program therefore must make payments 10 years before finding out whether the DOE will accept their applications. That denies them information they need to make important employment and financial decisions.

Click here to learn more about the current situation and read the full article, courtesy of ABA Journal.