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Media Domino: A Blog About Student Debt Fighting for Borrowers’ Rights in Big Sky Country

Fighting for Borrowers’ Rights in Big Sky Country

The following amicus brief, co-authored with Montana Legal Services and National Consumer Law Center, is part of a series of amicus curiae briefs filed by SBPC pushing back on student loan industry efforts to escape justice.

By Persis Yu and Seth Frotman | December 18, 2019

Montana Legal Services Association, National Consumer Law Center, and the Student Borrower Protection Center filed an amicus brief to support Montanans demanding justice for abuses by the Pennsylvania Higher Education Assistance Agency (PHEAA, a/k/a Fedloan Servicing) — a large, student loan servicing company that deprived these borrowers of their rights under federal law to Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF).

In this case, the Montana Supreme Court is considering an appeal by student loan borrower and public defender James Reavis, who filed a complaint in Montana court to seek redress after PHEAA miscounted his student loan payments made in an effort to qualify for PSLF. These claims are similar to suits brought by the Massachusetts Attorney General and the New York Attorney General. PHEAA moved to dismiss the case, and the lower court granted this dismissal, improperly reasoning that Reavis’ state law claims are preempted by federal law.

Our brief agrees with Mr. Reavis and his counsel that the trial court misread federal law, which clearly provides individual borrowers with the ability to use state laws prohibiting unfair and deceptive practices as a legal tool to demand justice from abusive student loan companies.

For too long, the student loan industry has sought to sell judges on exotic legal theories to absolve these companies of the consequences of their abuses and deny borrowers their day in court.

Our brief lays out the importance of IDR and the PSLF program for borrowers serving in their communities across the country, including in Montana. IDR is the largest and most effective safeguard against financial hardship for low-income student loan borrowers, irrespective of their occupation or employment status. For borrowers who are unemployed or earn very low wages, IDR offers the promise of a zero dollar monthly “payment.”

For public service workers earning low wages, IDR is also a key component of PSLF. When workers complete ten years of public service and make income-driven loan payments during that time, as required by the program, the government should uphold its end of the bargain and forgive these borrowers’ loans.

However, loan servicers like PHEAA routinely deprive borrowers of these rights and thwart Congress’ intent to forgive these loans, as required by federal law. Borrowers have faced problems in both enrolling in IDR Plans that help them make lower payments that they can afford in order to qualify for PSLF, and in the PSLF applications themselves. For instance, only about 1% of PSLF applicants actually receive the promised discharge. The government is well aware of these problems, with a string of Government Accountability Office reports from 2015 through 2019 documenting the mismanagement of the PSLF Program from its inception. When PSLF does not work how it was intended, police officers, teachers, and other public servants are deprived of their right to forgiveness under the law.

Because of these widespread issues, causes of action under state law are a critical lifeline for borrowers, especially when federal laws provide no legal recourse and federal agencies have no interest in protecting borrowers.

Because of these widespread issues, causes of action under state law are a critical lifeline for borrowers, especially when federal laws provide no legal recourse and federal agencies have no interest in protecting borrowers.

The fiasco surrounding PSLF illustrates this dynamic well — the Department of Education has repeatedly failed to hold servicers like PHEAA accountable, despite credible allegations of widespread abuse and mismanagement. While PHEAA argues that state laws are preempted, such preemption arguments by student loan servicers have already been rejected in cases brought by state law enforcement officials in Washington, Illinois, Massachusetts, Pennsylvania, and Mississippi, and were rejected by the 7th Circuit Court of Appeals in an appeal of a private lawsuit earlier this year.

The Montana Supreme court should reject the trial court’s incorrect holding Reavis. This decision would align with recent precedent and preserve access to justice for student loan borrowers across Big Sky Country.


Persis Yu is a staff attorney at the National Consumer Law Center (NCLC) and is the director of NCLC’s Student Loan Borrower Assistance Project. She also works on other consumer advocacy issues.

Seth Frotman is the Executive Director of the Student Borrower Protection Center. He previously served as Assistant Director and Student Loan Ombudsman at the Consumer Financial Protection Bureau, where he led a government-wide effort to crack down on abuses by the student loan industry and protect borrowers.

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