2016 has been a big year in student loan law. We saw the release of Revised Pay As You Earn (REPAYE), a new income-driven repayment plan for federal student loans, although its rollout and implementation were a bit of a mess. We saw a continued federal crackdown on predatory for-profit schools which resulted in the collapse of ITT Technical Institute. The Obama administration issued final rules on student loan forgiveness and debt relief for students who were defrauded by their colleges and universities. And finally, Donald Trump was elected to be the next President, leading to a great deal of uncertainty about the direction of student loan programs.
There’s never a dull moment when it comes to student loan issues, and as the year comes to a close, there’s still a lot going on. Here are some highlights.
ABA Sues the Dept. of Education over Public Service Loan Forgiveness
The American Bar Association (ABA) is suing the U.S. Dept. of Education over severe inconsistencies in its treatment of borrowers working towards Public Service Loan Forgiveness (PSLF). The ABA is a nonprofit organization, and the Dept. of Education’s loan servicers had previously certified that employment with the ABA was “qualifying employment” for purposes of PSLF. Then, this year, the Dept. of Education did a complete reversal and is now contending that the ABA does not qualify because it’s not the “right” type of nonprofit. We just learned that this was not a bureaucratic mistake, but a deliberate change of the rules halfway into the game, leaving ABA employees (and others in similar organizations) in limbo. This lawsuit is, to my knowledge, the first of its kind for the PSLF program, and its outcome is going to be very important.
The Dept. of Education Continues to Garnish Social Security Checks
Federal student loan default can be horrible for a variety of reasons, largely because of the federal government’s massive collection powers. One such power allows the government to garnish Social Security payments. This can lead to substantial harm to elderly, disabled, and impoverished student loan borrowers who have no way to repay their student loans and may be on the brink of homelessness. We recently learned that the government has forcibly collected $1.1 billion through Social Security garnishment since 2001, and over $171 million last year alone. Over 100,000 of these borrowers are elderly and disabled. With increasing attention to this practice, will it continue?
Advocates Push Obama Administration on Student Loan Forgiveness
It’s a strange time for borrowers who are asserting “Defense to Repayment.” The Obama administration just issued final rules governing eligibility for student loan debt relief for borrowers defrauded by their schools. But while tens of thousands of applications have already been submitted, the U.S. Dept. of Education has made very few determinations. Meanwhile, the incoming Trump administration has promised to roll back many of President Obama’s regulations, including those related to student loan forgiveness for defrauded borrowers. Student loan advocates and their allies are pushing the administration to grant group-wide student debt relief for the tens of thousands of applicants who are waiting on decisions – because if they don’t get any student debt relief now, they may not ever. The Obama administration only has a few weeks to decide.
Massachusetts Considers Tougher New Rules for Debt Collection Lawsuits
Massachusetts is considering implementing new requirements for lenders filing debt collection lawsuits against consumers. One proposal would require that debt collectors take extra steps to verify a borrower’s address, since many debt collection lawsuits result in judgments after a borrower is not properly notified of the lawsuit. Another proposed rule would require that debt collectors verify whether or not the debt is time-barred by the statute of limitations prior to filing a lawsuit, since many debt collectors will sue borrowers on old debts. While the proposals are, for the moment, limited only to credit card lawsuits, if successful they could be expanded to include other debt collection cases, including those involving student loans.
If you think 2016 was a big year for student loan law, just wait until 2017. The first borrowers to apply for Public Service Loan Forgiveness (PSLF) will be doing so after October of 2017. We may see changes to income-driven repayment plans. The incoming administration could roll back a lot of the new regulations created by the Obama administration, including the new protections for defrauded students. And we may see new restrictions imposed on graduate students and low-income borrowers. Stay tuned – it’s going to get busy.
In the meantime, I sincerely wish everyone a very happy holiday.