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Student Loan Litigation

This presentation by Joshua R.I. Cohen covers various topics related to student loan litigation from the plaintiff's perspective. It includes discussions on federal loan claims, rehabilitation, reasonable and affordable payments, violation of state laws, private loan claims, potential claims for rehabilitation, and more.

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Student Loan Litigation

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  1. The Plaintiff’s Perspective Student Loan Litigation Presented by Joshua R.I. Cohen

  2. Topics • Federal Loan Claims • Rehabilitation • 9/10 • Reasonable and Affordable • Other Claims • Private Loan Claims • Violation of State Laws • Potential Claims

  3. Rehabilitation 9/10 • 20 U.S.C. § 1078-6(a)(1)(A): 9 payments made within 20 days of the due date during 10 consecutive months • DL - 34 C.F.R. § 685.211(f): nine voluntary, reasonable, and affordable monthly payments within 20 days of the due date during ten consecutive months • FFEL - 34 C.F.R. § 682.405(b)(1)(ii): nine payments are received within a ten-month period

  4. Rehabilitation 9/10 • Borrowers must make (9) nine full, timely, voluntary monthly payments of an approved amount in a (10) ten month period in order to qualify for Direct rehabilitation. Borrowers may miss one payment in a ten-month period and still qualify for Direct rehabilitation. 2009 PCA Manual page 87. • Borrowers may miss one payment in a ten month period and still qualify for FFEL rehabilitation. 2009 PCA Manual page 103.

  5. Rehabilitation 9/10 • Compare to Perkins Loan Rehabilitation: • Borrowers must make a full, timely, voluntary payment of an approved amount each month for 9 consecutive months in order to qualify for NDSL-Perkins rehabilitation. 2009 PCA Manual page 95. • Litigated as Class Actions • Violation still occurring

  6. Rehabilitation – R&A • 20 U.S.C. § 1078-6(a)(1)(B): Neither the guaranty agency nor the Secretary shall demand from a borrower as monthly payment amounts described in subparagraph (A) more than is reasonable and affordable based on the borrower’s total financial circumstances. • DL - 34 C.F.R. § 685.211(f): The amount of such a payment is determined on the basis of the borrower’s total financial circumstances.

  7. Rehabilitation – R&A • FFEL - 34 C.F.R. § 682.405(b)(1)(iii)(A): Include a consideration of the borrower’s and spouse’s disposable income and reasonable and necessary expenses including, but not limited to, housing, utilities, food, medical costs, work-related expenses, dependent care costs and other Title IV repayment. • (B) Not be a required minimum payment amount, e.g. $50, if the agency determines that a smaller amount is reasonable and affordable based on the borrower’s total financial circumstances.

  8. Rehabilitation – R&A • Litigated on both Class and Individual basis.

  9. Other Federal Loan Claims • FDCPA violations • Applicable against debt collectors only • State law violations • Applicable against lenders, guarantee agencies, servicers, and debt collectors • HEA preemption not an issue • Especially when claim is non-conformity with HEA

  10. Private Loan Suits • Confusion between Fed and Private loan status leads to misrepresentations: • Charging collection fees above State maximum • Stating Fed purchased private loan • Misrepresenting that wages can be garnished without lawsuit • Statement that there is a lien against SS • Statement that law license can be revoked

  11. Private Loan Suits • Other claims: • Collection of a discharged private student loan • BAPCPA effective October 17, 2005 • Discharge based on filing date • Continued credit reporting of discharged loan • FCRA violation

  12. Potential Claims • Federal FFEL Rehabilitation • Failure to provide written rehabilitation agreement before making first payment. • 34 C.F.R. § 682.405(b)(1)(vii) A guaranty agency must provide the borrower with an opportunity to object to terms of the rehabilitation of the borrower’s defaulted loan. • DL and FFEL Rehabilitation • Forwarding accounts for AWG while borrower attempts to negotiate R&A Rehab.

  13. Potential Claims • Federal Consolidation • 6 payments prior to consolidation - • No payment required if consolidating into ICR or IBR • Only 3 payments required if consolidating into other payment plan

  14. Potential Claims • Federal Loan Servicers • Failure to alert delinquent borrowers of IBR • Offering deferment/forbearance instead of IBR • Offering forbearance instead of deferment • Misrepresenting IBR qualifications • Must earn a minimum AGI/must be employed

  15. Bankruptcy Discharge • Private: Failure to offer flexible repayment plans is a consideration by many judges for discharge • Fed: IBR not always an acceptable response to hardship claim

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