On February 22, 2019, Judge Timothy Kelly issued an important opinion in America Bar Association v. U.S. Department of Education. The American Bar Association (ABA), suing for itself and four public-service attorneys, accused the Department of Education (DOE) of violating fundamental principles of administrative law when it ruled that the public-service lawyers were ineligible to participate in the Public Service Loan Forgiveness program (PSLF), a student-loan repayment program designed to provide student-loan debt relief to people who work in public service jobs. ABA also argued that DOE acted wrongly when it ruled that the ABA is not a public-service organization eligible to participate in the PSLF program.
In a lengthy decision, Judge Kelly ruled against the ABA regarding its own claims. The ABA has no legal rights under the Public Service Loan Forgiveness statute, Judge Kelly determined; and therefore the Department’s conclusion that the ABA did not constitute a qualified public-service employer had no legal consequences. But Judge Kelly concluded that DOE had violated the rights of three public-service attorneys when it ruled they were ineligible for PSLF participation.
More than one million Americans have applied for PSLF eligibility; and in initial screenings, about 75 percent of the applicants were certified as PSLF eligible due to the nature of their public service jobs. Later, however, when DOE began processing requests for PSLF debt relief, it denied 99 percent of them. In American Bar Association v. U.S. Department of Education, Judge Kelly ruled that DOE had acted “arbitrarily and capriciously” toward three public-service lawyers when it changed the eligibility standards for the PSLF program and later ruled the three lawyers were ineligible to participate. Judge Kelly’s decision has enormous implications for student-loan debtors who are relying on the PSLF program to help them deal with their federal student loans.
ABA v. U.S. Department of Education: a summary of Judge Kelly’s decision
In 2016, the American Bar Association brought suit against DOE over its handling of the PSLF. In its complaint, ABA argued that the Department had violated ABA’s rights when it ruled that ABA was not an approved public-service organization entitled to participate in PSLF. ABA also sued on behalf of four public-service lawyers who had been declared ineligible for PSLF participation by DOE.
All four attorneys in ABA’s lawsuit carried significant amounts of student-loan indebtedness. Michelle Quintero-Millan graduated from University of Denver’s law school. Her student-loan burden had grown from $340,000 when she initially began repayment to more than $430,000 due to accrued interest.
Geoffrey Burkhart graduated from DePaul University College of Law in 2008 and went to work for ABA as Attorney and Project Director for Legal Services. Burkhart’s student indebtedness had grown from $155,899 in 2009 to over $200,000 in 2017, even though he had been making regular student-loan payments.
Kate Voigt graduated from Boston College Law School and began working for the American Immigration Lawyers Association, an organization that provides legal services for immigrants. Her debt had grown from $205,546 when she first graduated to more than $247,000.
Jamie Rudert, a 2010 graduate of American University Washington College of Law, worked for Vietnam Veterans for America, where he represented veterans with disability claims. He estimated that his student-loan debt had grown from about $135,000 when he graduated to $161,985 by May 2017.
All four lawyers took public-service jobs in the belief that their jobs qualified them to participate in PSLF. ABA argued that DOE had violated the Administrative Procedure Act when it changed its definition of public service employment, and it also argued that the Department had violated due process by reversing course without giving the attorneys proper notice.
DOE defended its actions with a variety of arguments. First, DOE argued that its decisions concerning PSLF eligibility were not were not “final agency actions,” and thus ABA’s lawsuit was premature. But Judge Kelly rejected this argument as mere “nonsense.” It was clear, Judge Kelly observed, that the four lawyers faced growing debt burdens and had “structured their careers and long-term financial plans around their eligibility for the PSLF program.” Thus, Judge Kelly wrote, “DOE’s ruling obviously had an ‘immediate’ and ‘significant’ impact on their ability to plan their careers and finances.”
DOE rejected two attorneys’ PSLF claims based on the agency’s “Primary Purpose” standard. In essence, DOE said that Quintero-Milan and Burkhart were not qualified for PSLF because ABA–their employer–was not an organization that offered public services as its primary purpose. DOE maintained that the Primary Purpose standard had always been in place, and that the original determination that Quintero-Milan and Burkhart’s qualified for PSLF had been an error.
But Judge Kelly rejected that argument. The record was clear, Judge Kelly ruled, that DOE had changed its certification standard when it adopted the Primary Purpose rule and that it had done so without complying with the Administrative Procedure Act.
Again, Judge Kelly disagreed. The evidence was all-but-conclusive, Kelly ruled, that DOE adopted this standard after it had informed Voight that her job was PSLF qualified but before it reversed itself and told her she was ineligible.
Thus, Judge Kelly concluded, with regard to three of the plaintiff attorneys–Quintero-Milan, Burkhart, and Voight—DOE had changed its position concerning PSLF eligibility to their detriment without engaging in the reasoned decisionmaking process required by the Administrative Procedure Act. Therefore, all three lawyers were entitled to summary judgment on their claims against DOE.
In summary, Judge Kelly ruled that DOE’s decisions must be set aside if they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. DOE, by changing the way it determined PSLF eligibility in violation of the procedural requirements of the Administrative Procedure Act, had violated the rights of Quintero-Milan, Burkhart, and Voight. Accordingly, Judge Kelly vacated DOE’s Primary Purpose and School-Like Setting standards along with the denial letters DOE had sent to Quintero-Millan, Burkhart, and Voight, and remanded their PSLF applications back to DOE for reconsideration in light of Judge Kelly’s opinion.
Judge Kelly’s ruling is one of at least 63 federal court decisions that have ruled against the Trump administration over the past two years. As the Washington Post reported, plaintiffs accused the Trump administration of violating the Administrative Procedure Act in two-thirds of these cases; and it was this violation that constituted the heart of Judge Kelly’s decision.
American Bar Association v. U.S. Department of Education is an important decision for three public-service attorneys, and it could have enormous implications for other individuals in public-service jobs who are relying on the PSLF program to manage their college loans. As discussed earlier, DOE denied 99 percent of the applications for PSLF loan forgiveness it had processed as of September 2018, including applications filed by people who had previously been told by DOE’s servicing agent that they were PSLF eligible. Judge Kelly’s ruling has the potential to force DOE to reverse thousands of those denials and reprocess them in harmony with Judge Kelly’s conclusion that DOE had changed the rules for determining which student-loan borrowers qualified for PSLF in violation of the Administrative Procedure Act.