Advocacy Alerts

Court Orders Department of Education to Consider Student Loan Relief Application, Calling Request for Further Delay “Frivolous and in Bad Faith”

The United States District Court for the Central District of California issued an Order today that directs the Department of Education to rule on the loan relief application of a former Corinthian student that has been pending for over two years.  To date, the Department of Education has not ruled on thousands of applications for loan relief submitted by borrowers whose federal student loans were originated by private banks under the Federal Family Education Loan Program.

The Plaintiff, Sarah Dieffenbacher, filed her first application for loan relief in March 2015. Her loans went into default while her application was still pending.  In late 2016, Sarah received a notice that her wages would be garnished. She works as a home health care phlebotomist to support herself and her four children. She objected to the wage garnishment because the terms of her loan and federal law both provide that Corinthian’s fraudulent actions render her loans unenforceable. She asked the Department to hold the hearing on her objections to which she was entitled.

After the Department of Education overruled her objection, citing the fact that her file included a signed loan contract, and ordered the garnishment to go forward, Sarah filed a lawsuit against the Department in March.  Represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, she argued that the Department did not consider the arguments or evidence she presented before rejecting her claim. As the Court noted, her application was supported by 254 pages of exhibits, which included a sworn statement from Sarah as well as records from the Attorney General of California regarding documented misconduct on the part of Everest and its parent company.  The Department also did not provide Sarah with the requested hearing before issuing a summary denial.

In response to the lawsuit, the Department filed a motion asking that the Court refrain from examining the case altogether.  The Court ruled that this request was not based on a “substantial or legitimate concern” but rather was “both frivolous and in bad faith,” and “appears to be an attempt to evade judicial review so that it can retain the ability to garnish Plaintiff’s wages without a conclusive ruling as to the enforceability of her loans.”  Under the ruling, the Department now has ninety days to provide Sarah with a conclusive ruling on her application for loan relief.  Responding to the ruling, Sarah said, “I’m fighting for myself, but also for so many others who were defrauded by for-profit schools.  I hope this case will put pressure on the Department to do the right thing.”

This ruling comes amidst growing concern that the Department of Education is refusing to take actions required by law and its own regulations designed to wipe out student loan debts that are the product of fraud and illegal activity by predatory schools.  Tens of thousands of applications for relief based on the fraud of Corinthian and other for-profit schools have been pending with the Department for months and even years.  “Today’s ruling confirms that student loan borrowers have rights that exist independently of political winds and caprices.  It is inexcusable to delay and thereby deny Sarah and other borrowers in similar positions their contractual and statutory rights,” said Toby Merrill, director of the Project on Predatory Student Lending and one of the lawyers representing Sarah.

Additional Information

Ms. Dieffenbacher is also represented by Alec Harris, Eileen Connor, and Deanne Loonin of the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, as well as Robyn Smith of the Legal Aid Foundation of Los Angeles.

Click here for a copy of the Court’s Order.

Click here for the Project’s press release about the Order.

Project Attorney Urges Department of Education to Prohibit For-Profit Colleges from Using Forced Arbitration to Hide Fraud and Deception of Students

Project on Predatory Student Lending Attorney Eileen Connor asked the Department of Education to use its current rulemaking process to prohibit colleges participating in the Federal Student Aid program from forcing students to settle disputes against the school through arbitration. Ms. Connor, along with Noah Zinner of Housing and Economic Rights Advocates, is representing the Legal Aid Community and the interests of their clients in the ongoing Negotiated Rulemaking.

Student borrowers who have been harmed by predatory institutions face significant barriers to raising claims and winning relief in arbitration, particularly because most predatory schools’ arbitration clauses prohibit class action suits and group claims, forcing borrowers to go it alone.  The proposal argues that predatory institutions use arbitration—a confidential, non-public dispute resolution process that favors corporations over individuals—as a means to cover up fraud and misconduct, as in the case of Corinthian Colleges. Yesterday, nine Senators made a similar request.

More information about the Negotiated Rulemaking can be found on the Department’s website here.

Two Project on Predatory Student Lending Alumni Testify to Department of Education

Two alumni of the Project on Predatory Student Lending testified to the Department of Education in support of the rights of borrowers treated unfairly by for-profit colleges to a fair, effective, and efficient process to get their federal student loans discharged. Over the past two weeks the Department held hearings in Washington, D.C. and San Francisco to allow the public to comment on its upcoming rulemaking, and to propose new topics to add to the agenda.

Megumi Tsutsui was a student in the clinic in 2013, after working with the Project as a volunteer in 2012. She is currently an Equal Justice Works Fellow at Housing and Economic Rights Advocates (HERA) in Oakland, California, where she works to eliminate barriers to affordable credit. Megumi shared the story of a borrower deceived and ripped off by one of the Corinthian schools campuses in California, and urged the Department to create “a clear and transparent process that is easily accessible for students eligible to receive a discharge of their loans under defense to repayment.” She also highlighted the need for automatic relief for groups of borrowers who are affected by widespread misconduct within a given program, school, or group of schools, and encouraged the Department to investigate when it sees signs of widespread misconduct and to identify students who have been affected and are eligible for discharge.

Mike Firestone, a student in the clinic in 2012-13 and current Director of Strategic Initiatives and Assistant Attorney General in the office of Massachusetts Attorney General Maura Healey, delivered powerful testimony urging the Department “to establish simple processes for impacted students to seek the relief to which they are entitled by law and by contracts,” and asking the Department to “rely on conclusions and investigative findings reached by state Attorneys General regarding state law violations and provide discharges without requiring individual students to make a submission to the Department.” He described some of the impressive efforts that Attorney General Healey’s office has pursued to help borrowers harmed by for-profit schools, including lawsuits against several schools, as well as hundreds of hours of outreach to borrowers. He said, “Relief must not be limited just to those who can hire a lawyer, or those who know the magic words about placement rates to communicate in an attestation. . . . These students are counting on us to enforce the law and fight for them.”

We are incredibly proud of their advocacy on behalf of low-income people who have been harmed by widespread lawless, unfair, and deceptive conduct by for-profit schools, and gratified that they continue to work on behalf of their clinical clients’ interests years after each of them left the clinic.

Legal Services Center Launches Veterans Justice Pro Bono Partnership

BBA Representing Veterans Training

Dana Montalto, Daniel Nagin, Dr. Sandy Dixon, Betsy Gwin, and Major Susan Lynch present to attorneys about representing less-than-honorably discharged veterans.

On Tuesday, June 2, the Veterans Legal Clinic of the Legal Services Center launched the Veterans Justice Pro Bono Partnership. Through the program, the clinic will refer cases, offer trainings, and provide ongoing support to local attorneys who agree to provide pro bono representation to veterans discharged less-than-honorably in petitions to upgrade their discharge statuses. Having a less-than-honorable discharge can prevent a former servicemember from accessing care and treatment from the Department of Veterans Affairs and impede efforts toward stable employment, education, and housing.

The Partnership kicked off with a half-day training at the Boston Bar Association, where attorneys learned about military law and culture, the review boards, and service-related medical diagnoses and treatment, among other topics. In addition to Veterans Legal Clinic attorneys Daniel Nagin, Betsy Gwin, and Dana Montalto, presenters included Susan Lynch, an attorney and Major in the Judge Advocate General Corps of the U.S. Army Reserves, and Dr. Sandra Dixon, a core faculty member of William James College who teaches about trauma and meeting the needs of returning veterans. In attendance were more than two dozen attorneys, including solo practitioners, public-interest lawyers, and members of some of Boston’s leading law firms.

Hundreds of thousands of servicemembers were separated with less-than-fully-Honorable discharges in the past decades, including more than 200,000 in the Post-9/11 Era. Despite the availability of a legal remedy and a demand for legal assistance, very few attorneys offer representation to former servicemembers before the records correction boards and even fewer provide pro bono representation to low-income veterans. The mission of the Veterans Justice Pro Bono Partnership is to close that gap by providing attorneys interested in assisting those who have worn the uniform with the skills and resources necessary to represent them.

Attorneys who are interested in joining the Veterans Justice Pro Bono Partnership should contact Dana Montalto at dmontalto[at]law.harvard.edu.

Summary of Proposed New Federal Student Loan Repayment Plan

The U.S. Department of Education is proposing a new federal student loan repayment plan, called REPAYE. It is based on the existing Pay As You Earn (PAYE) plan.  Key differences from PAYE are summarized below. For more information about LSC’s work on behalf of student loan borrowers, visit the Project on Predatory Student Lending.

Eligible Borrowers. The new REPAYE plan is available to all student Direct Loan borrowers regardless of when the borrower received the Direct Loan and whether the borrower has a Partial Financial Hardship (PFH).

Forgiveness. Loans will qualify for forgiveness after twenty years if all loans in REPAYE are for undergraduate study only. Loans qualify for forgiveness after twenty-five years if at least one of the loans in REPAYE is for graduate study.

  • Qualifying monthly payments include any payment made under REPAYE, other ICR plans, the standard ten year repayment plan, the alternative repayment plan, any month during an economic hardship deferment, or any payment under another plan that is equal to or more than the borrower’s standard ten-year repayment amount.

Married Borrowers. Married borrowers’ adjusted gross income includes the borrower’s spouse’s income whether they file joint or separate tax returns, unless the borrower certifies that the he or she is separated or that he or she cannot reasonably access the income information of his or her spouse.

Monthly Payment Caps. Monthly payments will not be capped at the amount the borrower would have paid under a standard ten-year repayment plan.

Accrued Interest. If a borrower’s monthly payment is not sufficient to pay accrued interest:

  • Subsidized & Subsidized Portions of Consolidation Loans: accrued interest is waived for no more than three consecutive years. Thereafter, the Department will charge 50% of the remaining accrued interest.
  • Unsubsidized, PLUS, & Unsubsidized Portions of Consolidation Loans: the Department will charge 50% of the remaining accrued interest.

Interest Capitalization. When a borrower has a PFH, interest accrues but is not capitalized. If the PFH ends, the Department will capitalize accrued interest equal to no more than 10% of the original principal balance when the borrower entered REPAYE. Above this limit, interest will continue to accrue, but will not be capitalized while the borrower remains on REPAYE.

Failure to Provide Required Documentation of Income. If the borrower does not provide the required income documentation within ten days of the deadline, the borrower will be removed from REPAYE and placed on an alternative repayment plan. The payment will be the amount necessary to repay the loan in full ten years from start of the alternative repayment plan, or by the end of the forgiveness period, whichever is earlier.

  • To re-enter REPAYE, the borrower must provide the required documentation, including information necessary to determine the amount the borrower would have had to pay while on the alternative (or a different) repayment plan.
  • Payments made under such an alternative repayment plan will not be qualifying payments for Public Service Loan Forgiveness, but will count toward loan forgiveness if the borrower later returns to REPAYE.

For further information, see the Department’s Negotiated Rulemaking site. For updates, see the Federal Register.

Download this summary as a pdf here.

LSC Files Amicus Brief with Law Professors in Third Circuit MERS Case

Last Monday, on March 23rd, the Predatory Lending Unit of the Legal Services Center filed an amicus brief with the Third Circuit urging it to uphold a groundbreaking decision from Judge Curtis Joyner of the Eastern District of Pennsylvania, which found that the Mortgage Electronic Registration System (MERS) violated the Pennsylvania Recording Statute by failing to document and record debt/mortgage note transfers. Student attorney K-Sue Park led the drafting of the brief, with assistance from Attorneys Max Weinstein and Charlie Carriere, and professors from Harvard Law School, Georgetown Law, Brooklyn Law and Cardozo School of Law signed and contributed comments.  The brief described MERS’ contribution to the foreclosure crisis, and the system’s destruction of the county recording system that has ensured the orderly transfer of real property across the country by making real property interests public and transparent since colonial times. MERS is a private system created by the mortgage industry in the mid-1990s to speed the process of securitization of mortgage backed securities (MBS) and to reduce the costs of recording. Now for the majority of mortgage loans across the country, MERS is recorded as nominee for the mortgage note holder in the public record, but MERS does not require that its members record or enter subsequent transfers into its database. By accelerating the securitization of MBS and encouraging sloppy transfers of interests in land in the early 2000s, MERS helped precipitated the foreclosure crisis. To save costs for sellers of MBS, MERS eliminated rules and procedures that protected the rights of mortgage holders and homeowners, putting the security of their homes at risk and causing the costs of enforcing their rights to skyrocket. Without legal authority or public accountability, MERS wrought havoc on the public land records by rendering the national record of interests in land largely inaccessible, inaccurate, incomplete, and unreliable.

The Legal Services Center Releases a Know Your Rights Video Series on the Basic Rights of Foreclosure and Eviction for Residents of Massachusetts

The Legal Services Center of Harvard Law School has released a Know Your Rights video series consisting of 97 videos informing residents of Massachusetts their legal rights when faced with foreclosure or eviction. The videos are a product of the Mattapan Initiative — a free legal services anti-foreclosure and eviction defense program created in 2013 in response to the foreclosure crisis that ravaged the Mattapan section of Boston, as well as other low-income neighborhoods throughout Massachusetts. The Mattapan Initiative and the Know Your Rights video series were funded by a grant from the Massachusetts Attorney General’s Office.

The aim of the video series is to educate Massachusetts residents regarding their legal rights when faced with foreclosure, or the threat of displacement due to foreclosure or eviction. The series includes videos on legal issues pertaining to: Basic Tenant Rights, Loan Modifications, Bankruptcy as it Relates to Foreclosure, Eviction Summary Process for Former Homeowners, Eviction Summary Process for Tenants as well as FAQ videos for homeowners and tenants facing foreclosure or eviction.

Attorney Roger Bertling, Director of the Mattapan Initiative and Director of the Consumer Protection/Predatory Lending Clinic at the Legal Services Center, says

we created these videos in hope that they’ll be used as a resource for distressed homeowners. The mission of the Legal Services Center is to protect the legal rights of the communities we serve, and as an extension of that mission, these videos are available to help people make informed decisions regarding their foreclosure or eviction.

The Know Your Rights videos can be viewed on the Get Legal Help section of this website, as well as on the Legal Services Center’s YouTube channel.

Post-Foreclosure Eviction Summary Process for Former Homeowners

Post-Foreclosure Eviction Summary Process for Tenants

Basic Tenant Rights for Residents of Boston

Loan Modifications and Ways to Avoid Foreclosure

How Bankruptcy Can Help Avoid Foreclosure

Related Terms & Definitions

Estate Planning Clinic Secures Survivor’s Benefits for Same-Sex Spouse

A year after Section 3 of the Defense of Marriage Act (“DOMA”) was found unconstitutional and almost four years after the Estate Planning Clinic of the Legal Services Center accepted the matter for representation, the Estate Planning Clinic has succeeded in helping a same-sex surviving spouse become entitled to survivor’s benefits.

Norman J. Laurin and his late husband, Danny R. Wood, were legally married when Wood passed away in March 2010. When Laurin tried to collect survivor benefits on Wood’s ERISA-mandated pension, the pension management company refused to recognize the marriage. The company, PBGC, denied Laurin’s claim on the grounds that as a federal agency, Section 3 of DOMA which defines marriage as between a man and a woman, prevented PBGC from providing a qualified preretirement survivor annuity (“QPSA”) to Laurin, as preretirement survivor annuities are only payable to surviving spouses and a QPSA was the only benefit available to Laurin according to the PBGC since no retirement benefits had begun prior to Wood’s death.  Essentially, PBGC said that since the federal government didn’t recognize Laurin’s and Wood’s marriage, despite the fact that Massachusetts recognized their marriage, Laurin would receive nothing by way of benefits from Wood’s 35 years with his company.  In addition, PBGC stated that since Wood had not completed an application for retirement benefits before his death, which would have allowed any beneficiary to succeed to such benefits upon his subsequent death, Laurin would not be entitled to any retirement benefits of any kind from Wood’s service with his company.  Unwilling to accept this result, Laurin wished to appeal PBGC’s decision

When the Estate Planning Clinic took the case in 2010 and when PBGC finally issued its final determination denying Laurin benefits, it was impossible to know if DOMA would be found unconstitutional. Accordingly, Tamara Kolz Griffin, Clinical Instructor at the Estate Planning Clinic, and her students presented both procedural and constitutional arguments in their appeal brief to PBGC in an attempt to secure benefits for Laurin on any grounds possible.  While securing benefits based upon the unconstitutionality of DOMA would have more far-reaching effects for other similarly situated same-sex couples, successfully attacking the procedural mistake by PBGC in sending Wood’s requested retirement application to the wrong address, thereby thwarting his attempt to apply for retirement benefits prior to his death, could secure benefits for Laurin without recognizing his marriage to Wood.

In drafting the appeal, the Estate Planning Clinic first contended that PBGC failed to mail a requested application for benefits to the correct address. Were it not for the mistake, Wood could have timely filed his application, which would have resulted in Laurin’s ability to receive such benefits upon Wood’s death as Wood’s named beneficiary. Second, the Clinic contended that DOMA was unconstitutional, and that as the legally recognized same-sex spouse of Wood under Massachusetts law, Laurin should be entitled to the qualified preretirement survivor’s annuity as the surviving spouse.  The Clinic set forth both arguments to improve the chance of success on the merits for Laurin.

“Constitutionality is an exciting issue. It’s sexy, and everyone wants to be on the cutting edge, so it’s easy to just want to focus on that one issue. But as exciting and interesting as it is, you have to do what’s right for your client,” Kolz Griffin said.

For the client, the right thing was to not just focus on the constitutional question but to attack PBGC’s determination on any and all available grounds.

The appeal, submitted in 2012, was still pending when Windsor v. U.S. was decided in June 2013, striking down Section 3 of DOMA as unconstitutional. But the Estate Planning Clinic’s work was not yet done. As PBGC deliberated on how to apply the Windsor decision to its pre-existing cases, students at the Clinic remained vigilant, regularly checking in with the company for updates, pushing forward in the process, and keeping the client informed.  The process was protracted because in the absence of guidance, PBGC did not know how to process the requested benefits to which Laurin should be entitled.

Finally, in July 2014, PBGC issued a corrected benefit determination recognizing Laurin as the surviving spouse of Wood and extending benefits to him. The reissued benefit determination extended a qualified preretirement survivor annuity to Laurin with interest retroactive to Wood’s date of death.  The anticipated value of such decision is estimated to be approximately $100,000.  When informed of PBGC’s final decision, Laurin was “shocked but delighted,” Kolz Griffin said.  It had been a long road, but justice had prevailed.

But the client was not the only person to benefit from the case. Eight students worked with Laurin, ferreting out legal issues, finding support for the arguments, drafting the appeal brief, and strategizing about procedural matters. In the process, students learned first-hand about dealing with issues like constitutionality and first impression.  Students also learned that perseverance can be just as important as a strong legal argument in a matter that extended over four years before reaching its final resolution.

“We couldn’t have done it without the students,” Kolz Griffin said. “Their contributions were so incredibly valuable, not just because of the many hours they contributed and the commitment they made, but also because of the valuable perspective they contributed on how the tasks and goals should be accomplished.”

Ultimately, the Clinic hopes that winning Laurin’s case can help other same-sex spouses gain the benefits they rightfully deserve as well.

“It’s always gratifying to take cases that have the potential for a positive result for not just the client but also the community, allowing us to achieve a greater impact with each case we take. By serving one client who is representative of many, we achieve a greater good with each success,” Kolz Griffin said.

-Ellis Liang

Bill Aims to Help Sellers of Foreclosure Homes

Max Weinstein, Clinical Instructor in the Predatory Lending Practice, is quoted in the July 30, 2014 Boston Globe article “Bill aims to help sellers of foreclosure home.”

From the article:

“A controversial bill aimed at helping homeowners who purchased foreclosed homes in recent years is winding through the state Legislature, and supporters hope it will pass before the session ends Thursday. It would reduce the amount of time people would have to challenge the legitimacy of a foreclosure and sue for the title from 20 years to about three…

‘Three years strikes me as a very short period of time,’ said Max Weinstein, who works at the Jamaica Plain-based Legal Services Center, a Harvard Law School group that helps low-income clients. Weinstein said he fears that lenders will just keep troubled homeowners in limbo for three years — easily done, given the amount of time it takes to work through the foreclosure process — until the time to sue for the title expires.

At that point, lenders can move to sell the property. ‘It’s a mess, it continues to be a mess,’ said Weinstein.”

Read the article.

McDonagh Named to Mayor Walsh Housing Task Force

Maureen - compressed

Maureen E. McDonagh, Director of the Post-Foreclosure Eviction Defense/Housing Law Clinic has been named to a new task force convened by Mayor Martin J. Walsh set to take on a challenge that has stymied Boston’s leaders for years: how to create more housing for low- and middle-income residents in a city beset by soaring rents and home prices.

Walsh announced the formation of the group composed of academics, developers, planners, tenants, and landlords in April, 2014.

“All of Boston’s residents deserve access to good quality housing,” Walsh said. “We will get there. We will make sure the city is a place that everyone in the community can call home.”

Walsh has charged the task force with producing a plan by early summer that sets concrete goals to meet the city’s housing needs along with strategies for reaching them. Among many challenges, he said, the group will need to find a way to control development costs while encouraging private developers to build homes and apartments for low-income families and the elderly.