Montana Scores Major Victory Against Predatory Student Loan Servicers

July 21, 2020 / Comments (0)

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(HELENA, MONT.) – The Montana Supreme Court has unanimously handed down a major victory for student loan borrowers struggling to hold financial institutions accountable. The court ruled in favor of Montana public servant James Reavis who sought relief from student loan servicer Pennsylvania Higher Education Assistance Agency (PHEAA), also known as FedLoan Servicing. The Montana Supreme Court reversed a district court’s ruling and found that Montana state law claims against federal student loan servicers are not preempted by the Federal Higher Education Act. The decision was announced on July 14, 2020.

James Reavis sued PHEAA alleging it miscounted his student loan payments made in an effort to qualify for forgiveness under the federal Public Service Loan Forgiveness Program. Servicer abuses, like the ones Reavis claimed he experienced, are common and force borrowers deeper into debt while denying them their right to partial forgiveness after years of public service.

The Montana Federation of Public Employees (MFPE) actively supported the appeal and filed an amicus curiae brief in support of Reavis.

The Montana Supreme Court’s decision

  • Ensures that borrowers are able to bring state-law claims against their loan servicer for failing to accurately account for their student loan payments
  • Guarantees consumers can hold student loan servicers accountable for abusive business practices
  • Joined a growing chorus of authorities in determining Education Secretary Betsy Devos’ informal and incorrect interpretation of federal preemption law is so deficient that courts should decline to give it any deference in court

MFPE President Amanda Curtis has released the following statement in response to the court’s decision:

Income-driven repayment plans and the Public Service Loan Forgiveness Program are of critical importance to Montanans who choose to pursue public service. Loan servicers like PHEAA routinely deny borrowers like James Reavis of their rights. The Montana Federation of Public Employees was proud to stand with Mr. Reavis, a dedicated public servant. We know loan servicers have plenty of allies and lobbyists in Washington, D.C., while working people depend on union membership for protection. MFPE members believe the promises made to Montana borrowers should be honored and that public servants should be rewarded for their sacrifices, not exploited. MFPE applauds the Montana Supreme Court’s decision.

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