NYLAG v. U.S. Department of Education
Headline Text: Through FOIA lawsuit, NYLAG Obtains Documents from U.S. Department of Education Showing Racial and Economic Disparities of Student Loan Judgments and Tremendous Missing Data
About NYLAG v. SSA
More Information
Name: NYLAG v. U.S. Department of Education
Dkt. #: 23 Civ. 1427
Court: S.D.N.Y.
Judge: Hon. Andrew Carter
Status: Settled
Claims: Violation of the Freedom of Information Act
Contact: If you have a federal student loan judgment entered against you and would like assistance, call NYLAG’s Student Borrower Advocacy Project at 212-946-0346 or email us at contactsbap@nylag.org.
Most federal student loan borrowers who miss payments and enter “default” status still have a variety of options to get their federal loans out of default and back into good status, including by enrolling in an affordable repayment plan. But a very small minority of federal student loan borrowers are referred for litigation by the United States Department of Education (USED), and then sued by the Department of Justice (DOJ), or by private collections agencies hired by the government. Once a judgment is entered against them, these borrowers lose access to most forms of student loan relief.
USED had not made public how it decides which borrowers to refer to DOJ for litigation. On May 19, 2022, NYLAG submitted a Freedom of Information Act Request to obtain records relating to this issue. When USED failed to respond by the deadline, NYLAG sued.
In response to NYLAG’s lawsuit, USED produced thousands of pages of documents relating to borrowers with judgments. Links to important documents are below. Key findings by NYLAG are:
- Extreme Concentration of Student Loan Judgments in Majority-Black Neighborhoods: NYLAG released the dataset obtained via the FOIA. According to the Department of Education, this dataset “reflects the number of borrowers in each zip code who currently have a judgment against them for defaulted student loans.” The data shows extreme racial and economic disparities. Specifically, student loan judgments are highly concentrated in majority-Black neighborhoods. For more information, read NYLAG’s release of the data here.
- Identical Borrowers Are Treated Differently Based on Where They Live: The Department of Education maintains a two-tiered policy that treats borrowers differently based on where they live. For most borrowers, the minimum principal balance of their loan must be at least $25,000 in order for the account to be referred to litigation. But borrowers who live in some areas can be sued even if their balance is just $600! These are the areas where the Department contracts with private law firms for collections, and include parts of California, Florida, Illinois, Michigan, New Jersey, New York, Pennsylvania, South Carolina, and Texas. In New York City, for example, a borrower could be sued on a loan as low as $600 if they lived in Brooklyn, Queens, or Staten Island, but not if they lived in Manhattan or the Bronx.
- The Department of Education Likely does not Have Adequate Data on Borrowers with Judgments: The Department of Education gave to NYLAG a chart that it claimed shows “the number of borrowers in each zip code who currently have a judgment against them for defaulted student loans.” But this chart contains only 2,843 borrowers, and only 14 of them are in New York State. These numbers are implausibly low, suggesting that the Department may lack reliable data on borrowers with judgments.
Highlights
Documents
- 2019 PCA Procedures Manual: The PCA Procedures Manual describes the procedures and policies required by USED for Private Collection Agencies (PCAs) that collect on defaulted federal student loans and grant overpayments. The litigation procedures can be found on pages 229-31.
- 2015 Immediate Credit Recovery Training Manual: Training manual for employees of Immediate Credit Recovery.
- 2015 Central Research Training Manual: Training manual provided to Central Research employees.
- 2015 Credit Adjustments Inc. Standard Operating Procedures: Manual utilized by a USED PCA designed to assist its staff with collections activity.
- 2019 Federal Student Aid Affirmative Litigation Referrals Standard Operating Procedures: Standard Operating Procedures to be filed when referring litigation on student loans.
- 2010 Litigation Support Unit Litigation Package Manual: Manual outlining the procedures necessary to prepare a “litigation package” when referring a case for litigation.