CATHERINE D. PERRY, UNITED STATES DISTRICT JUDGE.
Federal law allows certain student loan debt to be discharged if the educational institution falsely certified that the student was eligible for the loan. When plaintiff Maureen McGuire sought discharge of her student loans under this provision, the Department of Education denied the discharge. The relevant laws and regulations changed several times during the years McGuire was attending school. McGuire was not eligible for the loans at the time she took them out, because she did not have a high school diploma or the alternate educational qualifications then required, so the school's certification to the contrary was false. Additionally, the Department of Education relied on its regulations in denying her request for discharge, but some of those regulations are not consistent with the statutes. I will therefore reverse the decision of the Department and remand the case for further administrative proceedings.
Plaintiff Maureen McGuire brings this case against Arne Duncan, the United States Secretary of Education, under the Administrative Procedures Act and the Declaratory Judgment Act. She seeks a
McGuire obtained the loans at issue while she was a student at the University of Missouri at St. Louis (UMSL). She did not take out the loans when she first began attending UMSL, but did so several years into her studies. Although she ultimately obtained a college degree, she had never graduated from high school and she did not have a GED. She also did not satisfy any of the remedial programs or specified test requirements that applied to some students under the federal regulations in effect at different times.
Before McGuire filed this lawsuit, the Department sent her a number of letters with different reasons why it believed she was not eligible for discharge. The parties agree that the final agency decision was issued December 16, 2013. In that decision, the Department determined that McGuire was not eligible for discharge based on UMSL's alleged false certification of her eligibility because UMSL was not required to determine her ability to benefit or otherwise administer an ability-to-benefit test when certifying her loan eligibility:
ECF No. 1-5.
Title IV of the HEA grants the federal government the authority to provide student financial assistance. See 20 U.S.C. § 1001, et seq. One such program, the Federal Family Education Loan Program (FFEL),
As part of the FFEL loan application process, the educational institution must certify to the lender that the student is eligible to receive the loan. 20 U.S.C. § 1078(a)(2). The institution's eligibility to continue in the FFEL program hinges on its compliance with the certification process. See 20 U.S.C. § 1094(a)(6).
Under the HEA as it existed in 1988, when McGuire began attending UMSL, an individual who had a high school diploma or a GED was eligible to receive FFEL loans, provided that they met citizenship, enrollment, and other requirements. See 20 U.S.C. § 1091 (1988); see also Jordan, 194 F.3d at 170. Eligibility of students without a diploma or GED, however, depended upon the type of eligible post-secondary institution attended.
In order to be considered "eligible" under FFEL, some institutions, such as a "vocational school," could only admit students that had completed or left secondary school and had the "ability to benefit" from the training offered by the institution. 20 U.S.C. § 1085(c) (1988). In contrast, for a nonprofit "institution of higher education" (such as UMSL) to be eligible, it could admit students who had a high school diploma, a GED, or were beyond the age of compulsory school attendance. 20 U.S.C. § 1085(b) (1988). Thus, unlike vocational schools, nonprofit institutions of higher education were not required to admit only students who had the ability to benefit. Cf. id. The Department issued regulations reflecting these provisions. See 34 C.F.R. § 668.8 (1988).
Until 1991, students "admitted on the basis of the ability to benefit" had to demonstrate that ability in order to "remain eligible" for FFEL loans. 20 U.S.C. § 1091(d) (1988); Jordan, 194 F.3d at 170. Section 1091(d) provided three ways by which a student could demonstrate her ability to benefit: (1) by earning a GED before graduating or within the first year of study; (2) by obtaining counseling before admission and completing a remedial education program; or (3) by passing a test "subject to criteria developed by the appropriate accrediting association" that measures the applicant's aptitude to successfully complete the program. § 1091(d). The Department also issued regulations implementing these provisions. See 34 C.F.R. §§ 668.7(a)(ii) (1988) (students attending institution of higher education), 668.7(a)(iv) (students attending vocational school), 668.7(b) (ability to benefit requirements).
In 1991, Congress amended the HEA. See Higher Education Technical Amendments of 1991, Pub.L. No. 102-26, 105 Stat. 123 (1991). This amendment removed the requirement that an eligible school (including vocational schools) only admit students with the "ability to benefit." See id. at sec. 2(a)(2)-(3), 105 Stat. 123.
§ 1091(d) (Supp.1989-1992). This was the law in effect when McGuire took out her first FFEL loan in 1991.
In 1992, Congress again amended the HEA in response to public concern about schools that defrauded students who were unable to benefit from the school's training. See Jordan, 194 F.3d at 170; see also H.R. REP. 102-447, *10, *52, 1992 U.S.C.C.A.N. 334, 343, 385. Congress provided loan relief for borrowers who received loans beginning on or after January 1, 1986. 20 U.S.C. § 1987(c)(1) (Supp. 1989-1993). If the "student's eligibility to borrow under this part was falsely certified by the eligible institution ... then the Secretary shall discharge the borrower's liability on the loan...." Id. McGuire based her application for discharge on this portion of the law.
The Department established rules governing the discharge of claims based on a school's false certification of a borrower's eligibility; these rules continued to reference the pre-1991 eligibility requirements, including the "ability to benefit" language. See 34 C.F.R. § 682.402(a), (e) (1994). A student's eligibility was deemed to have been falsely certified if the school "admitted the student on the basis of the ability to benefit from its training and the student did not meet the applicable requirements" set forth in section 682.402(e)(13). 34 C.F.R. § 682.402(e). A student seeking discharge must submit a written request and sworn statement attesting, in part, that the borrower (1) received proceeds from a loan on or after January 1, 1986, to attend a school and (2) was admitted to that school on the basis of the ability to benefit from its training and did not meet the applicable requirements as described in § 682.402(e)(13). 34 C.F.R. § 682.402(e)(3). Section 682.402(e)(13) provided that a student is considered to have the ability to benefit if the student "for periods of enrollment between July 1, 1987 and June 30, 1996, achieved a passing grade on a test" approved by the Secretary or successfully completed a remedial education program.
Effective July 1, 1995, the Department issued new regulations stating that a student's eligibility is considered falsely certified if the school "[c]ertified the student's eligibility for a FFEL Program loan on the basis of ability to benefit from its training and the student did not meet the applicable requirements in 34 CFR Part 668 and section 484(d) of the Act, as applicable and as described in paragraph (e)(13) of this section." Federal Family Education Loan Program, 59 FR 61,210-01, 61,216 (Nov. 29, 1994) (to be codified at 34 C.F.R. § 682(e)(1)(i)(A)). The regulations continued to require a student borrower seeking discharge to state that she was admitted on the basis of the ability to
In addition to regulations, the Secretary issues guidance in the form of "Dear Colleague" letters.
Plaintiff Maureen McGuire attended high school in St. Louis, Missouri. Although her high school transcript indicates that she met the listed graduation requirements, it also indicates "Diploma Not Granted." Thereafter, McGuire obtained 16 credit hours at a community college. McGuire was admitted to UMSL in 1988.
McGuire first applied for an FFEL loan on October 18, 1991. The Department awarded McGuire with eight FFEL loans from that time until May 1995. McGuire graduated from UMSL with a BSBA on August 6, 1995.
McGuire completed a Loan Discharge Application on May 24, 2010. In her application, McGuire certified under oath that she had neither a high school diploma nor GED at the time of her enrollment at UMSL, that she had not been given an entrance examination testing her ability to benefit prior to admittance, and that she never completed a developmental or remedial program at UMSL. In support of the Loan Discharge Application and subsequent administrative process, McGuire provided to the Department a copy of her high school transcript and her UMSL academic file. The UMSL academic file contains no evidence that she was administered or achieved a passing grade on a standardized ability-to-benefit test or that she completed a period of developmental or remedial education.
The Department denied McGuire's application for discharge on June 30, 2010. This letter provided several reasons for denial. It stated that at the time of McGuire's enrollment, schools were required to certify students lacking a high school diploma or GED as eligible by determining that the student had the ability to benefit.
McGuire filed a second application for discharge on June 24, 2011, and in a letter dated September 12, 2011, the Department again denied McGuire's discharge application. This letter cited a different reason for the denial: "During the period you were enrolled, students who earned a GED or successfully completed a program of developmental or remedial education are considered to have demonstrated the ability to benefit from the education offered. You certified under penalty of perjury that you did not earn a GED while enrolled in the program at the school.
Following a new discharge request dated March 18, 2013, the Department sent a letter dated December 16, 2013; this letter, representing the final decision of the Department, once again denied McGuire's application for discharge. In this final agency decision, the Department determined that McGuire was not eligible for discharge based on UMSL's alleged false certification of her ability to benefit because UMSL was not required to determine her ability to benefit or otherwise administer an ability-to-benefit test when certifying her loan eligibility.
McGuire seeks summary judgment on her declaratory and injunctive relief claims against the Secretary, which allege that the Secretary's actions were arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with the HEA. The Secretary has filed a motion for summary judgment, arguing that the Department's decision complied with the Administrative Procedures Act, which provides the sole source of relief.
The standards for summary judgment are well settled. In determining whether summary judgment should issue, the Court views the facts and makes inferences from the facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party has the burden to establish both the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Here the parties have stipulated that the facts are undisputed, and so only legal issues remain.
McGuire argues that the regulations cited by the Department in its final decision denying her application, 34 C.F.R. § 668.7, were superseded and nullified by the 1991 and 1992 amendments to the HEA. The Secretary argues that those amendments are not relevant to the Chevron inquiry because any determination regarding a student's ability to benefit, including the necessity of such determination, is made at the time of admission and not at loan application. Since a student admitted to a nonprofit institution of higher education in 1988 did not need to be "able to benefit" in order to be eligible for an FFEL loan, the Secretary reasons, the school never needed to make an ability to benefit determination.
The Secretary cites to various sections of the 1988 version of the HEA and the implementing regulations related to the definitions of an "eligible institution," such as a "vocational school."
Whether a student was "admitted on the basis of the ability to benefit" has no lasting relevance to McGuire's case. Following the 1991 and 1992 amendments to the HEA, that phrase was categorically stricken from the Part B of the HEA — the Part housing the FFEL program, and from Part F — the Part housing general definitions and the student eligibility requirements, including § 1091. Compare 20 U.S.C. §§ 1071-1087-2; 1088-1091 (1988) with 20 U.S.C. §§ 1071-1087; 1088-1091 (Supp.1989-1993). Unlike the pre-amendment HEA, which only imposed able-to-benefit eligibility requirements on students who were "admitted on the basis of the ability to benefit," the amended HEA categorically required any student not possessing a high school diploma or GED to pass an examination approved by the Secretary in order to be eligible for FFEL loans. Compare § 1091(d) (Supp.1989-1992) with § 1091(d) (1988). To the extent that the Department determines FFEL loan eligibility based on whether a student was "admitted on the basis of the ability to benefit," that determination is not in accordance with the HEA as it existed after July 1, 1991, the effective date of the 1991 amendments.
Congress's intent as to student FFEL eligibility requirements is clearly articulated in the statute. The relevant inquiry is simply whether UMSL falsely certified McGuire as an eligible student. This certification occurs when the student applies
The Department's own regulations recognize this principle. Section 682.402(e)(13) analyzes whether a student was able to benefit according to the standards in effect during the relevant "period of enrollment." Period of enrollment is defined as "the period for which a[n FFEL] loan is intended." Federal Family Education Loan Programs, 57 Fed.Reg. 60,280-1, 60,288 (Dec. 18, 1992); 34 C.F.R. § 682.200(b) (1993).
Despite the clear intent of Congress that all students lacking a diploma or GED be tested to be eligible, the Department failed to issue new regulations governing student eligibility. Instead, the regulations retained the 1988 student eligibility standards, including the FFEL exemptions from ability-to-benefit requirements for students attending nonprofit institutions of higher education. Compare 34 C.F.R. § 668.7 (1988) with § 668.7 (1991-1994).
Section 1087, which allows for loan discharge upon a showing that a school falsely certified a student's FFEL eligibility, is clear. That section states that if a "student's eligibility to borrow under this part was falsely certified by the eligible institution, then the Secretary shall discharge the borrower's liability on the loan.... "20 U.S.C. § 1087 (Supp.1989-1993).
The 1994 regulations implementing § 1087 define false certification as occurring if the school "admitted the student on the basis of the ability to benefit from its training and the student did not meet the applicable requirements" set forth in section 682.402(e)(13). 34 C.F.R. § 682.402(e) (1994) (emphasis added). While the 1995 (and subsequent) regulations no longer explicitly defined false certification as having occurred when a school "admitted" a student on the basis of ability to benefit who lacked that ability, those regulations continued to incorporate the conflicting student eligibility provisions from 34 C.F.R. section 668.7.
The Department's failure to update its regulations to comport with the amended HEA imposed outdated eligibility standards and placed additional burdens on McGuire. These additional burdens — that she show she was admitted on the basis of her ability to benefit and prove that she did not meet the applicable requirements for admission on that basis — were not required under the HEA. This court concludes that the "admitted on the basis of the ability to benefit" requirements set forth in 34 C.F.R. sections 682.402(e) and 668.7, represent an impermissible interpretation of the standards required for a student to obtain discharge under 20 U.S.C. § 1987(c)(1).
The Secretary argues that its decision letter from June 30, 2010, provides an independent ground by which the Department's denial may be upheld. Normally, a reviewing court must affirm or reverse agency decisions on the basis of the reasons given by the agency. See SEC v. Chenery Corp., 318 U.S. 80, 87, 63 S.Ct. 454, 87 L.Ed. 626 (1943); SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). However, a reviewing court may affirm an agency decision for reasons other than provided by the agency, where it was clear that the agency would have reached the same ultimate result. See Consolidation Coal Co. v. Smith, 837 F.2d 321, 323 n. 4 (8th Cir.1988) (citing Salt River Project Agric. Improvement and Power Dist. v. United States, 762 F.2d 1053, 1060-61 n. 8 (D.C.Cir.1985)).
In its June 30 letter, the Department denied McGuire's application on the ground that she offered "no corroborating evidence of ability to benefit violations at the school" during her enrollment.
McGuire has shown that the Department's denial of her loan discharge application was based on regulations that conflict with the unambiguous intent of Congress. As such, the denial must be reversed. However, an injunction or declaratory relief is inappropriate in this case. See 20 U.S.C. § 1082(a)(2) (allowing the Secretary to be sued but prohibiting injunction or other similar process from being issued against the Secretary). The Secretary also notes, and McGuire does not contest, that additional fact-finding may need to be done at the administrative level to ensure that McGuire qualifies for discharge once the appropriate standards are applied. This case will be remanded to the Secretary for further proceedings in accordance with this Order.
Accordingly,
A separate judgment in accord with this Memorandum and Order is entered this same date.
