Price v. U.S. Dep't of Educ.

209 F.Supp.3d 925

Phyllis PRICE, Plaintiff,

v.UNITED STATES DEP'T OF EDUCATION, Defendant.

CIVIL ACTION H-14-3441

United States District Court, S.D. Texas, Houston Division.

Signed July 22, 2016

Shahara Wright Menchan, Attorney at Law, Houston, TX, for Plaintiff.

Charmaine Michele Aarons Holder, United States Attorneys Office, Houston, TX, for Defendant.

Order of Adoption

Lynn N. Hughes, United States District Judge

On July 1, 2016, Magistrate Judge Stephen Wm. Smith issued a memorandum and recommendation (30). No party filed objections. The memorandum and recommendation is adopted as this court's order.

Plaintiff's motion for summary judgment (17) is granted and defendant's motion for summary judgment (18)is denied because the Department of Education's denial of Price's request for a student loan discharge was arbitrary, capricious, an abuse of discretion, and not otherwise in accordance with law.

The court will issue a separate final judgment discharging Price's obligation on her Federal Consolidation Loan Debt No. 17749770 and ordering the Department to refund the $1,799.44 garnished from her wages in partial payment of the debt.

MEMORANDUM AND RECOMMENDATION

Stephen Wm Smith, United States Magistrate Judge

Phyllis Price brings this action under the Administrative Procedure Act (APA) challenging the refusal of the Department of Education to discharge her student loan debt. Price claims that she was entitled to discharge under 20 U.S.C. § 1087(c) because the school falsely certified her eligibility for the loan.

A hearing on the parties' cross-motions for summary judgment was held on January 5, 2016, and supplemental briefing has been filed. Because the record amply demonstrates that the agency decision was arbitrary, capricious, an abuse of discretion, and not otherwise in accordance with law, Price's motion (Dkt. 17) should be granted and the defendant's motion (Dkt. 18) should be denied.

Background¹

Price attended a Houston branch of the University of Phoenix between 2002 and 2005. At the time of her enrollment she was 52 years old and working for a company called Technip as a contract administrator. Responding to a University of Phoenix advertisement, she attended a meeting at a local hotel where counselors discussed requirements for admission. Persuaded to apply, she went in person to the University office on the Katy Freeway, where she met with a counselor to go over the admission application in detail. Price explained to the counselor that she did not graduate from high school, although she had taken continuing education classes through George Washington University and had received a Certificate in Government Contracting. The counselor nevertheless instructed her to state on the application that she had actually finished school and to fill in the year she "should have graduated." The counselor further explained that, once the University verified that Price had not graduated, it would advise whether remedial classes would be necessary before beginning class work. Price filled out the forms as she was told.²

Price graduated from the University in 2005. She continued to work for Technip, but was never promoted to a higher position. She also applied for higher level jobs with other companies, but again was unsuccessful. Last year, she made a lateral move to a different company doing substantially the same job she had done before enrolling at the University. She is now 66 years old.³

To pay for her classes, Price obtained a series of government-backed FFELP⁴ student loans. In June 2006, Price consolidated these into a single loan totaling $36,868.00 at 5.3% interest and used the proceeds to pay off the previous loans. Her first payment on the consolidated loan was due in August 2006. The Department acquired the loan in February 2007. Price has made no payments on the consolidated loan to date. The Department declared the loan in default in October 2007.

Price began seeking discharge of the loan in March 2008 by filing a "False Certification (Ability to Benefit) Loan Discharge Application." Her application was initially denied by the Department's loan servicer, American Student Assistance (ASA). ASA instructed Price to submit evidence of her failure to obtain a high school diploma. In May 2008, Price submitted a copy of her high school transcript and requested a hearing. On June 24, 2009, the Department affirmed the initial decision denying her discharge application. Collection efforts intensified thereafter, with Price persistently objecting to all such efforts and writing letters of protest to all agencies concerned. On March 28, 2014, the Department issued its final agency decision denying Price's false certification discharge application. On October 1, 2014, the Department issued a ruling that Price's wages were subject to wage garnishment withholding.⁵ Price filed this action on December 1, 2014.

Standard of Review

Summary judgment is appropriate if no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). The party moving for summary judgment has the initial burden to prove there are no genuine issues of material fact for trial. Provident Life & Accident Ins. Co. v. Goel , 274 F.3d 984, 991 (5th Cir.2001). Dispute about a material fact is "genuine" if the evidence could lead a reasonable jury to find for the nonmoving party. In re Segerstrom , 247 F.3d 218, 223 (5th Cir.2001). "An issue is material if its resolution could affect the outcome of the action." Terrebonne Parish Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d 303, 310 (5th Cir.2002).

The APA governs court review of agency action. 5 U.S.C. § 706(2). The court may set aside agency action if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Id. at § 706(2)(A). Judicial review of agency action alleged to be arbitrary and capricious is narrow, and the court is not to substitute its judgment for that of the agency. Weisbrod v. Sullivan , 875 F.2d 526, 527 (5th Cir.1989). Nevertheless, the agency must articulate a satisfactory explanation for its action, including a "rational connection between the facts found and the choice made." Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962). In reviewing that explanation, the court must consider "whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Bowman Transp. Inc. v. Arkansas – Best Freight Sys., 419 U.S. 281, 285, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974). As the Supreme Court explained:

Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto Ins. Co. , 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983).

An agency decision stands or falls on the same basis articulated by the agency itself in its order. Post hoc rationalizations submitted to a reviewing court are not acceptable. SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). Finally, an agency's construction of a statute it administers is "not in accordance with the law" if it is contrary to the unambiguous language of the statute, or is not a permissible construction of the statute. Chevron, U.S.A., Inc. v. Natural Res. Def. Counsel, Inc. , 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

Analysis

A. Statutory and Regulatory Background

Under the FFELP, private lenders make loans for "eligible borrowers" to attend post-secondary institutions of higher education. See 20 U.S.C. § 1071 et seq. The loans are insured by state and private guaranty agencies and reinsured by the Department of Education. Generally, eligible borrowers are those who have a high school diploma or a GED. However, a "student who does not have a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate," may qualify for a loan if the school certifies that she has the ability to benefit from the education it provides. Id. at 20 U.S.C. § 1091(d).

At the time Price applied for her loan, § 1091(d) provided three ways to satisfy the "ability to benefit" (ATB) requirement: (1) passing an independently administered ATB test approved by the Secretary of Education; (2) satisfying a state-prescribed process for determining ATB; or (3) completing a secondary school education in a home-school setting approved under state law. Only the first option (passing the ATB test) would have been available to Price because it is undisputed that Texas has no prescribed process for determining ATB, and Price was not home-schooled. Dkt. 27 at 1.

Congress amended the law in 1992, spurred by public concern over unscrupulous schools exploiting student borrowers who received no benefit from expensive classes of little use. See Jordan v. Sec'y of Educ., 194 F.3d 169, 170 (D.C.Cir.1999) ; see also H.R. Rep. 102-447, *10, 1992 U.S.C.C.A.N. 334, 343. Congress provided 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(c)(1).

Under 34 C.F.R. § 682.402(e), a student's eligibility to borrow is falsely certified by the school if the borrowing student did not meet the statutory eligibility conditions, including a high school diploma and ATB requirements. To apply for discharge on this basis, the borrower must submit a written request and sworn statement, and the factual assertions in the statement must be true. 34 C.F.R. § 685.215(c). The...