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BG&A Calls for Full Court Rehearing on Improper Deference to Education Department’s Reversal of Student Loan Collection Cost Policy

By September 9, 2015No Comments

On behalf of the American Action Forum, Boyden Gray & Associates filed papers yesterday in support of a petition for rehearing en banc in Bible v. Student Aid Funds in the U.S. Court of Appeals for the Seventh Circuit. The petition asks the full court to reexamine a divided panel’s decision to accord “Auer deference” to the Department of Education’s new interpretation of its own rule governing the collection costs that a guarantor may charge to a borrower who defaults on her student loan.

The Higher Education Act explicitly states that guarantors may charge reasonable collection costs on defaulted loans that are subsequently “rehabilitated” by a series of token payments, and the Department’s own rules require guarantors to charge collection costs on a defaulted loan. But under the Department’s new interpretation–announced for the first time in a post-argument amicus brief–guarantors may not charge collection costs on rehabilitated loans.

The American Action Forum’s proffered amicus brief argues that Auer deference is inappropriate where, as here, the agency’s interpretation of its own rule conflicts with a former interpretation of the same rule and the agency fails to acknowledge or explain its policy change. In this case, the Department’s new interpretation is contradicted by a 1994 policy statement capping collection costs for rehabilitated loans at 18.5% and declaring such costs to be “reasonable” under the very same regulation that the Department now interprets to bar such costs.

Adam Gustafson

Author Adam Gustafson

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