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ABA lawsuit targets changes to loan forgiveness program

December 21, 2016

Public sector attorneys hoping to have some of their student loans erased could find out they owe more money than they previously thought.

A lawsuit filed in federal court Tuesday details the stories of four lawyers who were informed their positions in nonprofits no longer qualified for the Public Service Loan Forgiveness program and their previous payments did not count toward the program. The American Bar Association filed the complaint against the U.S. Department of Education to stop the denials.

The suit charges the education department changed the eligibility requirement after having already approved the work as qualifying under the PSLF and after the individuals made decisions and loan repayments. The ABA claims the Department of Education did not provide adequate notice or explanation of the change and applied the changes retroactively without statutory authorization.

Of the named individuals in the lawsuit, one currently works for the ABA and another is a former employee.

“Paying off what can often be substantial student debt while working a public service job is difficult,” ABA President Linda Klein said in a statement. “The PSLF program promised these dedicated lawyers a chance at financial stability in return for doing public service work. After following the rules, these people had the rug pulled out from under them. We cannot tolerate these actions of the Department of Education.”

The program, started in 2007, provides incentives for graduates to pursue public sector careers. In particular, borrowers who work full-time in a public service job and make 10 years of payments will have any remaining debt on their student loan forgiven.

A November 2016 report from the Government Office of Accountability found the PSLF program could cost the federal government significantly more. The program could start forgiving loans in October 2017 but the Department of Education’s calculations did not account for the benefit until 2018. When the GAO revised the math to accommodate the loans being forgiven in 2017, the estimated cost rose by $70 million.

The case is American Bar Association et al. v. United States Department of Education and John B. King Jr., in his official capacity as Secretary of Education, 1:16-cv-02476. It was filed in the U.S. District court for the District of Columbia.

 

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