ABA, Education Department Settle Student Loan Forgiveness Case

The U.S. Department of Education has agreed to recognize employees who work for the American Bar Association as public service workers who are eligible for student loan forgiveness. This settles a 3-year-old lawsuit, in which a Ropes & Gray litigation team represents ABA and four individual plaintiffs pro bono, that accused the department of improperly administering the Public Service Loan Forgiveness program.

The department sent a letter yesterday, Feb. 18, acknowledging that full-time ABA employees are “employed in a public service job” with “a public service organization,” and therefore are eligible for student loan forgiveness under PSLF.

The settlement comes one year after a federal judge ruled against the Education Department, saying the department had improperly changed terms of the PSLF program for some men and women who have dedicated their careers to public service. On Feb. 22, 2019, U.S. District Judge Timothy J. Kelly ruled that changes to the eligibility requirements, made several years after the program began, were “arbitrary and capricious.” Kelly ruled in favor of three individual plaintiffs who worked several years in public service and were initially approved for loan forgiveness, only to be notified years later that the approval was retroactively denied by the Education Department based on new rules.

The ABA and four public servants, represented by Ropes & Gray, sued the Education Department and the education secretary in December 2016, alleging mismanagement of the PSLF program. The lawsuit detailed how the department changed eligibility requirements for work that was clearly “public service” after previously approving the same work, and after individuals had made major life decisions based on those prior approvals.

“After years of financial uncertainty, these dedicated, service-oriented professionals finally got the fair shake they deserve from the Department of Education,” said Ropes & Gray litigation & enforcement partner Chong S. Park. “We are very pleased with the positive impact this has for our individual plaintiffs as well as other student loan borrowers in similar positions.”

“We are pleased the Department of Education now fully accepts providing loan forgiveness to many people who rightfully earned it,” said ABA Executive Director Jack Rives. “Without the dedicated public service of so many attorneys, our nation would not be able to provide services to those in need. Student loan forgiveness is a small but very meaningful way to repay young people who spend 10 years of their lives in lower-paying jobs to serve the public.”

The ABA claimed that the department and its contractor, FedLoan Servicing, hurt employees of some nonprofit groups by initially telling them they qualified for loan forgiveness, then reneged on those promises years later. Kelly agreed, ruling that the Education Department’s rule changes had “an immediate and significant impact on their ability to plan their careers and finances.”

The PSLF program, enacted in 2007 and signed into law by President George W. Bush, provides incentives for graduates to pursue full-time public service careers. It provides a mechanism to forgive student loan debt balances for men and women who make timely loan payments for 10 years while working full-time in public service jobs. The program broadly defines public service jobs as those providing “public interest law services,” “public education,” “public service for individuals with disabilities,” and “public service for the elderly,” among a variety of other categories.

The case is American Bar Association v. United States Department of Education, case number 1:16-cv-02476 in U.S. District Court for the District of Columbia. The lawsuit can be downloaded here and the judge’s 2019 ruling can be downloaded here. The settlement letter can be found here.