ABA Sues Feds Over Loan-Forgiveness Denial

WASHINGTON (CN) – The American Bar Association sued the U.S. Department of Education over its denying lawyers eligibility in its public service loan-forgiveness program.

The program, which began in 2007, nullifies remaining student loan debt after those working for a full-time qualifying employer make 120 monthly payments.

But in a complaint filed in the U.S. District Court for the District of Columbia, the bar association claims several of its members were initially told by the department that they worked for an eligible employer, only to receive notice several years later telling them this was no longer the case.

As a result, the years of on-time monthly payments the lawyers thought would count toward their loan forgiveness no longer count towards that goal.

The first of those lawyers expecting to receive loan forgiveness would have been making their final payments this year, the Dec. 20 complaint says.

Public service jobs eligible for the forgiveness program include those which provide “‘public interest law services (including prosecution or public defense or legal advocacy on behalf of low-income communities at a non-profit organization),’ ‘public education, ‘public service for individuals with disabilities’ and ‘public service for the elderly,’” the complaint says.

The plaintiffs, who also include many individual lawyers, claim when it enacted the act establishing the loan-forgiveness program did not further define which jobs qualified as public service.

“It does not require, for example, that ‘public education’ occur in a school or school-like setting,” the complaint says.

The bar association argues since the jobs their lawyer plaintiffs accepted are in fact related to public service, these positions should still qualify for the public service loan-forgiveness program.

The ABA further argues the revocation of the eligibility for the loan-forgiveness program has taken employees away from public service jobs, which they claim is the opposite goal of the program.

“Many of these employers, as governmental entities and nonprofit organizations, cannot otherwise attract law school graduates with high debt loads because these organizations are in a position to offer only relatively modest salaries,” the complaint says.

The ABA also says that because many of the jobs that fit under the public service umbrella are lower-paying, or in the realm of nonprofits, a central perk for individuals accepting these positions was the promise of loan forgiveness.

Not only are employees leaving their jobs due to the eligibility revocation, but potential new employees are seeking jobs elsewhere upon hearing the positions are no longer eligible, the complaint says.

The bar association says it tried to rectify the situation, but that to date the Education Department has not been willing to address the issue.

The plaintiffs seek a determination that the American Bar Association is a qualifying employer under the public service loan-forgiveness program; that the individual plaintiffs are eligible for student loan forgiveness; and that the department’s change in how in interprets program eligibility violates the Administrative Procedure Act.

The plaintiffs also seek an order requiring the Education Department to implement an appeals process for borrowers who have their student loan program status revoked.

The bar association is represented by Ropes & Gray of Washington, D.C.

A representative of the Education Department said it does not comment on pending litigation.

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