"Over time you end up paying the roommate to live there."

December 5, 2022 9:39 AM

The little-known student loan middlemen who are threatening debt forgiveness (MarketWatch) For decades, lawmakers shaped policy to benefit entities that earned money from the federal student-loan system, sometimes to the detriment of borrowers. Now, they are at the center of legal efforts to stop Biden’s cancellation plans (currently on hold).
posted by box (28 comments total)

I consider their claim for standing to be quite weak, though it may be the best of a very weak lot, I guess. Entering into a contract with the federal government to provide a service does not mean, without more, that you are guaranteed particular volume of that service, especially not forever. Even if it did (or if you'd been contracted for a guaranteed minimum volume), the remedy would be that the government would need to pay you damages for the lost income, not that the government couldn't stop providing the service that you subcontract to offer.
posted by praemunire at 9:44 AM on December 5, 2022 [19 favorites]

(These are all the most rent-seeking of rent-seekers, by the way, and they're clinging desperately to this model because they have nothing else to offer.)
posted by praemunire at 9:44 AM on December 5, 2022 [19 favorites]

The policy goal of the people behind the suits is not rent seeking it is a destruction of the federal government. If they cared about money or damages, they would be seeking damages but the actual goal is to ensure that no government program, no matter how much it does not harm buisness interests is successful. Anything that delays, disrupts or derails this federal program is a win.
It's the same play book as covid vaccine conspiracies. The federal government deploying vaccines and encouraging masking would have helped buisness. Less sick days, more federal spending on privately developed vaccines, more PPP loans but at the end of the day those programs would have reminded people that a strong government can be a good thing, it can help you and it can be there when you need it; that outcome is unacceptable.
posted by kzin602 at 9:54 AM on December 5, 2022 [39 favorites]

Exactly. And I have to think this is the end-game for privatization: changes in government policy become more difficult the more a business is "harmed" by that change. It's a completely undemocratic check on the government.

Until fairly recently, the federal government used to service all student loans, and if they still did this would be even less of an issue.
posted by RonButNotStupid at 10:27 AM on December 5, 2022 [7 favorites]

That the contract doesn't guarantee a specific volume of business seems true, but (and IANAL) isn't the question not whether they suffered harm, but whether they suffered harm from an action that the administration didn't have legal authority to take? Then if they do have standing, I thought that the court case would be over the question of whether the administration did have authority. And then if the court found that they didn't, then they would be forbidden from taking the action, regardless of the magnitude of the harm.

1) I'd love to hear from someone who's doing more than guessing, and 2) This is by no means an endorsement of the middlemen.
posted by Mr.Know-it-some at 11:44 AM on December 5, 2022 [3 favorites]

My loans recently switched to MOHELA, and I’m not surprised to learn that they are one of the companies fighting forgiveness. Part of me wants to call them up and tell them that not only am I not going to pay them back, instead please put a check mark down on the domestic terrorist option.
posted by zenon at 11:46 AM on December 5, 2022 [10 favorites]

Hm, so the only answer to this insanity is for everyone to incorporate as a business so that they have some sort of legitimacy before the courts/ in the system.... Like the argument would be, "clearly this law harms the business interests of John Paul Smith, Inc. so it's clearly unconstitutional and an unfair taking (or whatever)!" I'm kidding and this seems totally ridiculous, but am I? and is it?
posted by flamk at 11:51 AM on December 5, 2022 [6 favorites]

i wonder how many of politicians supporting this b.s. are *also* frequent and vocal proponents of the invisible hand of the free market

i don't wonder for very long though, i'd guess the number is significantly non-zero
posted by armoir from antproof case at 12:14 PM on December 5, 2022 [1 favorite]

the only answer to this insanity is for everyone to incorporate as a business

No, whether you have standing has nothing to do with whether you are an individual or business. Individuals threatened to sue because the proposed program would have made them worse off. So the administration just changed the rules so they wouldn't be harmed.
posted by Mr.Know-it-some at 12:20 PM on December 5, 2022 [1 favorite]

It should also be noted that the reason some individuals would have been made worse off was because their Republican-led states saw an opportunity to deliberately punish them and ran with it. Plenty of other states took action to ensure that the forgiveness would not be considered taxable income.
posted by RonButNotStupid at 12:28 PM on December 5, 2022 [6 favorites]

I don’t know about the legal bona fides. But I do know that contracting out student loan servicing has always been hugely problematic. There have been many reform proposals including handing servicing over to the IRS. Servicing is generally expensive and depends on forecasting delinquency and prepayment, so the servicers may not be wrong about this impacting their finances. And it was also stupid to think that the older securitized federal loans could be prepaid with no objections. Biden Admin made a total hash out of this.
posted by haptic_avenger at 12:59 PM on December 5, 2022

Re: flamk's comment, isn't that what the sovereign citizen people all claim about themselves?
posted by drossdragon at 1:01 PM on December 5, 2022

isn't the question not whether they suffered harm, but whether they suffered harm from an action that the administration didn't have legal authority to take?

It has to be (among other things) a legally cognizable harm fairly traceable to the government action. No legally cognizable harm, no standing.

1) I'd love to hear from someone who's doing more than guessing

...? I'm an attorney who's done work in this space for several years. I even got an A in Fed Courts.
posted by praemunire at 1:31 PM on December 5, 2022 [12 favorites]

Biden Admin made a total hash out of this.

Setting borrowers up so the burden was on them to self-report forgiven debt to extremely hostile tax authorities in Red states was a colossal oversight. Like, I get that the IRS didn't consider it to be taxable income and saw no need to issue the appropriate 1099-C forms, but for those Republican-led states where it *is* taxable income and who *will* prosecute anyone who fails to report it, that's putting a bunch of people who might not know otherwise in a position where they could face consequences.

Also, it completely sucks that Republicans have so many opportunities to be cruel and make life miserable for political gain, and it sucks that apparently there's nothing that can be done about it?
posted by RonButNotStupid at 1:33 PM on December 5, 2022 [4 favorites]

Also, it completely sucks that Republicans have so many opportunities to be cruel and make life miserable for political gain, and it sucks that apparently there's nothing that can be done about it?

If we've reached the point where drafts of federal legislature need to include a separate addendum entitled "Risks inherent to Republican state legislatures weaponizing side effects of this bill against poor residents of the state," we might as well just admit the experiment in democracy is over, and pack up and head back to England.
posted by Mayor West at 3:12 PM on December 5, 2022 [12 favorites]

If we've reached the point where drafts of federal legislature need to include a separate addendum entitled "Risks inherent to Republican state legislatures weaponizing side effects of this bill against poor residents of the state," we might as well just admit the experiment in democracy is over, and pack up and head back to England.

Snark as much as you like - pretty clearly we have reached that point, and whether it's student loan forgiveness, sick time for railway workers, attempts to hold criminal politicians responsible, or any of a huge array of other issues, coming up with a plan that fails to reckon with Republican obstructionism borders on leadership malpractice - assuming that one actually wants to achieve the stated goal.
posted by Nerd of the North at 4:30 PM on December 5, 2022 [11 favorites]

federal legislature need to include a separate addendum entitled "Risks inherent to Republican state legislatures weaponizing side effects of this bill against poor residents of the state,"

You can call that section the "Dobbs Assessment" and yes, they had better be doing that kind of risk analysis for every piece of legislation because Republicans have demonstrated time and again that they'll take every opportunity to do the absolute worst the law allows them to.
posted by RonButNotStupid at 4:57 PM on December 5, 2022 [6 favorites]

My wife has been working on consolidating her loans and the forgiveness program for people in public service (she's an inner-city teacher) and Mohela has managed to "lose" paperwork or just generally mess things up at every step of the way.

Let me use this space to say, "Fuck Mohela".
posted by Ickster at 5:18 PM on December 5, 2022 [11 favorites]

Just here to say the US was never really an experiment in democracy and that was just good branding.
posted by CPAnarchist at 5:41 PM on December 5, 2022 [7 favorites]

Ok maybe there was some democratic flavor in the same way a purchasing co-op has democratic flavor. Except in this case they were purchasing slaves and stolen land. The results - once all the assets on the planet were dibsed up - now seem despairingly predictable, in hindsight.
posted by CPAnarchist at 5:49 PM on December 5, 2022 [2 favorites]

And it was also stupid to think that the older securitized federal loans could be prepaid with no objections.

Given the political background, it's fair to say none of this was going to be done without objections. But the older loans were issued by private banks and securitized by private issuers. If the risk of prepayment--always present--was insufficiently disclosed by the issuer, that's an issuer problem, or maybe an originator problem. (*) Not a federal government problem.

(*) A bunch of FFEL-backed ABS issued by Navient et al were at risk of technical default several years back because of the improved income-based repayment options (which effectively delayed repayment) led to increased uptake. No one even tried to argue that the feds were at fault. They had to get 100% consent from holders to amend the maturity dates instead. Some holders were thinking about going after the issuers, though.
posted by praemunire at 5:52 PM on December 5, 2022 [3 favorites]

Servicing is generally expensive and depends on forecasting delinquency and prepayment, so the servicers may not be wrong about this impacting their finances.

That something just "impacts your finances" doesn't give you standing, though. If another bank offers me the chance to refinance into a private loan, paying off the bank as permitted by the loan's terms and indirectly depriving the servicer of the small sum it is paid monthly to service my account, has the servicer suffered legally cognizable harm at anyone's hands? Nope.

I can't say with confidence that the administration will prevail because of the intense partisanship of the Supreme Court today--but I think it's telling that several of the district court cases went down in flames on standing grounds even in friendlier circuits.
posted by praemunire at 6:01 PM on December 5, 2022 [9 favorites]

we might as well just admit the experiment in democracy is over, and pack up and head back to England

Because obviously we want you back?
posted by Grangousier at 3:03 AM on December 6, 2022 [1 favorite]

FedLoanServicing, after 10+ years of payment as a federal employee, told me I was eligible for forgiveness. (Well, actually, they said I wasn’t, and then when I complained they recounted and said “oh wait we were wrong you were eligibile a year ago, our bad.”)

Then when I sent in the app asking them to drop the loans, they ignored my request, for months, only to tell me that I’m being transferred to MOHELA. If they fuck up my paperwork and won’t let the loans drop, I’m calling my senator.

The paperwork burden on the students is insane. The companies were non-responsive before one of the bigger ones dropped out of the market, I’m sure that with more people’s loans consolidated in fewer places the customer service will just be wonderful
posted by caution live frogs at 5:54 AM on December 6, 2022 [2 favorites]

Anyone considering going back to England hasn't been paying attention to the shitshow there.
posted by nofundy at 5:56 AM on December 6, 2022

(BTW, you should be eligible for a refund of any overpayments once your forgiveness goes through.)
posted by praemunire at 7:36 AM on December 6, 2022

Then when I sent in the app asking them to drop the loans, they ignored my request, for months, only to tell me that I’m being transferred to MOHELA. If they fuck up my paperwork and won’t let the loans drop, I’m calling my senator.

I just got my loans forgiven after 10 years (well 11.5). I sent in the info to MOHELA sometime in 2021 as they were my loan servicers. They forwarded my application and account to FedLoans (I think) who were processing all PSLF applications. Waiting ensued. In the meantime DoE finalized a recompete of the PSLF processing, with MOHELA winning the contract. FedLoans started sending applications and accounts (back) to MOHELA. Further waiting ensued. Finally about 3 weeks ago I got a letter telling me I had satisfied the terms of my loan and I had a zero balance.

During the many hours I spent on the phone tracking this process, I learned that my year+ wait was a timing issue and they claim to handle applications in about 6 weeks. The claim was only a small number of accounts could be transferred each day and my application arrived at a bad time. Couple weeks earlier or later and it would have been much quicker. Whatever. It cost me anxiety and time, but no money so what do they care?
posted by the christopher hundreds at 4:33 AM on December 7, 2022

In the meantime DoE finalized a recompete of the PSLF processing, with MOHELA winning the contract.

They didn't recompete, really, FedLoan decided it was just too hard to do the job right and quit.

I learned that my year+ wait was a timing issue and they claim to handle applications in about 6 weeks

Nah. People were waiting a year or more, especially if they'd had the bad fortune to be serviced some time in the past by the original Direct servicer (Direct Loan Servicing Center), which also left the job in a cloud of disgrace, and with the records in disarray, back in ~2013. FedLoan had to pay people who waited north of six months actual cash money (if not much) in the settlement with the NYAG.

The claim was only a small number of accounts could be transferred each day

And this is a bold-faced lie, the servicers have facilities to onboard and offboard thousands of accounts a day.
posted by praemunire at 7:24 AM on December 7, 2022 [1 favorite]