Education Secretary Betsy DeVos is named in the lawsuit.

Education Secretary Betsy DeVos is named in the lawsuit. Manuel Balce Ceneta / AP

Education Department’s Handling of Loan Forgiveness Draws Union Lawsuit

Teachers union’s Randi Weingarten joins eight teachers citing clerical errors behind denials.

Education Secretary Betsy DeVos, along with the department she runs, on Thursday was hit with a lawsuit by the American Federation of Teachers seeking redress for teachers who say they were unfairly denied benefits of the federal student loan forgiveness program for borrowers who were incentivized to work in public or nonprofit-sector jobs.

The suit, filed in the U.S. District Court for the District of Columbia by the union, its president Randi Weingarten and eight teachers from across the country, argued that DeVos has "done nothing to remedy the gross mismanagement" of the federal public service loan forgiveness program.

It faulted administration of the program by both the department and private lenders. Borrowers among certain classes of public-service workers, the union said, make 120 monthly payments toward their loans over the course of a decade or longer. “But qualifications for the forgiveness program are complex, and according to U.S. Department of Education data released last fall, only 96 applicants out of 28,000 who applied between October 2017 and June 2018 were approved.”

The suit cited studies of the program’s longstanding unreliability as documented by the Government Accountability Office and the Consumer Financial Protection Bureau, whose student loan regulations both DeVos and Trump appointees at the bureau have sought to roll back.

One plaintiff, Cynthia Miller, “is a teacher in Chicago who applied for loan forgiveness last year after making at least 120 qualifying payments,” the suit said. “That set off more than a year of back-and-forth with agents at the department, who gave her conflicting information and ultimately denied her application. When she asked for an explanation, she received a letter containing more than 160 pages of dense numerical code and undefined abbreviations.”

Another plaintiff, Janelle Menzel, “is a teacher in Minnesota who asked her loan servicer, Nelnet, about the federal Teacher Loan Forgiveness program, which forgives a portion of student loans for teachers working in low-income schools for five years. Menzel was eligible for the program," a press release from the union alleged, "but Nelnet told her she was not." The suit also alleged that Nelnet "misrepresented the payment process—leading to Menzel making payments for five years that were not counted toward Public Service Loan Forgiveness eligibility.”

The suit called some of the company denials “arbitrary and capricious,” citing processing errors and inaccurate information. It asked the court to require the department to vacate the loan forgiveness denials, freeze denials and provide a status report on the program, arguing that its current handling had violated the plaintiffs’ rights as well as the Administrative Procedure Act and the Fifth Amendment’s Due Process Clause.

Asked for comment by Government Executive, Education spokeswoman Liz Hill said the department does not comment on pending litigation, but it "is faithfully administering the complex program Congress passed."

The department has stressed that the program is complex and includes restrictions on the types of eligible loans. Back in December, the department did launch a new tool to help borrowers understand the program’s ins-and-outs.