NYLAG v. U.S. Department of Education

After a borrower misses payments on their federal student loans, the loans enter a “default” status. The U.S. Department of Education (USED) can then decide whether and how to proceed collecting on the defaulted student loan debt. USED has a variety of collections mechanisms available: it can garnish a borrower’s wages, offset their federal income tax returns or Social Security and disability benefits, and/or hire a private collection agency to begin collection efforts. Critically, even after the borrower has defaulted, the borrower still has access to many loan cancellation programs and has options to get their federal loans out of default and back into good status, including by enrolling in an affordable repayment plan. 

In some instances, however, USED refers defaulted federal student loans to the United States Department of Justice, which either sues the borrower to obtain a judgment on the outstanding debt or contracts with a private law firm to sue the borrower for that relief. Once USED obtains a judgment against the borrower, the borrower no longer has access to options to get their federal loans into good status.  

USED has not made public how it decides which borrowers to refer to DOJ for collection via litigation. Accordingly, on May 19, 2022, NYLAG submitted a Freedom of Information Act Request to obtain records relating to this issue. NYLAG’s Request also sought records relating to USED’s general processes for responding to FOIA requests. Because USED did not adequately respond by the deadline, NYLAG sued.