In a victory for public interest lawyers, the U.S. Department of Education recently settled a 2016 lawsuit brought by the American Bar Association (ABA) regarding the Department's retroactive changes to the standards governing what qualifies as a “public service organization” under the Public Service Loan Forgiveness Program (PSLF).
The issue and settlement stem from a December 2016 lawsuit, filed by the ABA and four other public servants, regarding the department’s new standards governing whether non-501(c)(3) not-for-profit organizations like the ABA qualified as “public service organizations” under PSLF.
The plaintiffs worked in public service and were initially approved for loan forgiveness with a qualifying public service organization, only to have that approval retroactively denied by the department based on its new Primary Purpose standard. As it relates to the ABA, the department concluded in 2016 that the ABA did not qualify as a public service organization for PSLF, because the ABA ostensibly failed to demonstrate “that the primary purpose of the ABA is to provide ‘public interest law services.’”
Bradley Yanke, Marquette 2011, is an attorney with Anderson O’Brienin Stevens Point, where he practices in accident & personal injury, litigation & dispute resolution, and worker’s compensation.
The settlement follows a Feb. 22, 2019, ruling by U.S. District Judge Timothy Kelly, which held that the department acted arbitrarily and capriciously when the department changed its interpretation of the eligibility standards for non‑501(c)(3) not-for-profit organizations.
ABA and Public Service Organizations
While Judge Kelly’s decision applied to three of the individual litigants, it did not apply to the ABA because it was not a “borrower.” Instead, the ABA was an employer that lacked an individual borrower’s rights and obligations to a claim of loan forgiveness.
Nevertheless, the court ruling on the impermissible changes to what qualifies as a public service organization seems to have had the desired effect for the ABA. On Feb. 18, 2020, the department agreed that borrowers who work full time for the ABA would be considered “employed in a public service job” and “employed full-time by a public service organization” for purposes of qualifying for loan forgiveness under PSLF.
Not Just the ABA
The settlement is encouraging for public interest lawyers beyond the small subset of attorneys working for the ABA. There are many attorneys who work for public service organizations whose primary purpose is other than the provision of public law services.
The court ruling and settlement appears to do away with the department’s 2016 retroactive adoption of the Primary Purpose standard to non-501(c)(3) not-for-profit organizations. Moreover, the department’s willingness to settle with an employer, as opposed to an individual borrower, allows for a wider impact.
As all know, PSLF is constant source of consternation among its participants. It is refreshing to see the department expand, rather than contract, the number of eligible participants.