De La Mota v. United States Department of Education
Docket: Docket No. 03-6257
Court: Court of Appeals for the Second Circuit; June 14, 2005; Federal Appellate Court
Marisol De La Mota, Froebel Chungata, and Oren Doron, public service attorneys for New York City’s Administration for Children’s Services (ACS), filed a lawsuit against the Department of Education (DOE) under the Administrative Procedure Act, contesting the DOE’s interpretation of eligibility for student Perkins Loan cancellation. The Higher Education Act (HEA) of 1965 allows for loan cancellation for individuals providing services to high-risk children from low-income communities. They sought cancellation based on their roles in securing child support and prosecuting child abuse cases for low-income families.
The United States District Court for the Southern District of New York dismissed their claims, which led to their appeal. The Circuit Court concluded that the appellants were presumptively eligible for loan forgiveness under the HEA and found that the District Court had improperly deferred to the DOE's interpretations regarding eligibility.
The Perkins Loan Program, part of Title IV of the HEA, is designed to provide low-interest loans to financially needy students, with the Secretary of Education responsible for its implementation and regulation. The program requires institutions to match federal funds, and eligibility for loans is determined locally by the schools. The loans are essential in financial aid packages, with limits of up to $4,000 for undergraduates and $6,000 for graduate students. In 1985, amendments to the HEA encouraged public service careers by allowing for partial or total loan cancellation.
Subsequent amendments to the Higher Education Act (HEA) expanded public service categories eligible for loan cancellation, including law enforcement, nursing, and childcare. A significant amendment enacted in 1992 specifies that loans are canceled for full-time employees of public or private nonprofit child or family service agencies who provide or supervise services to high-risk children from low-income communities (20 U.S.C. 1087ee(a)(2)). Low-income communities are defined as those with a high concentration of children eligible under Title I of the Elementary and Secondary Education Act of 1965. High-risk children are those under 21 who are low-income or at risk of abuse, neglect, or have serious emotional or behavioral issues (20 U.S.C. 1087ii).
The HEA lacks a definition for "providing services." Borrowers seeking loan cancellation apply through their lending school, which determines eligibility rather than the Department of Education (DOE) (34 C.F.R. 674.52(a)). Since the 1992 amendments, the DOE has provided guidance on eligibility but the extent of required deference to these efforts is central to the appeal. In 1995, the DOE enacted a regulation that verbatim incorporated the statute (34 C.F.R. 674.56(b)(1)), mandating cancellation of up to 100% of Perkins Loans for qualifying service.
The DOE’s annual Student Financial Aid Handbook introduced a new qualification, stipulating that services must be provided "only" to high-risk children, although services to adults are permissible if they are family members of these children and secondary to the children's services. The DOE clarified that elementary or secondary schools and hospitals are not eligible employing agencies. Additionally, institutions can seek further guidance from the DOE’s Policy Development Division, and the Federal Student Aid Ombudsman assists borrowers in resolving disputes with lenders, though this office cannot overturn lender decisions.
Each plaintiff applied for loan cancellation based on their employment with the Administration for Children's Services (ACS). De La Mota submitted applications in 2000 through three institutions: City University of New York (CUNY), Manhattanville College, and New York Law School (NYLS). Although her loans were initially forgiven for two years, NYLS later rejected her application, stating that her role did not provide "direct" or "only" services to high-risk children, a requirement derived from an informal email and not the HEA statute or DOE regulation. The DOE supported NYLS's decision, asserting that her services were provided to the City of New York rather than directly to children.
Chungata, also a NYLS graduate, faced a similar situation when he applied for loan forgiveness in 2001, with his ineligibility based on the same email regarding De La Mota's case. Doron, who prosecutes neglect and abuse cases, applied for cancellation through Tulane and Rutgers. While Tulane approved his application, Rutgers denied it, citing that he does not provide direct services to high-risk children. The DOE, despite claiming a lack of authority in determining eligibility, endorsed Rutgers' decision against Doron.
The plaintiffs sought judicial review under the Administrative Procedure Act, challenging the DOE's interpretation and denial of loan cancellation benefits, and named their law schools as defendants. The District Court granted the DOE's motion for summary judgment.
The District Court found that the Department of Education (DOE) issued regulations under its statutory authority governing the Perkins Loan Program, including repayment provisions, and should receive deference in interpreting its own regulations and eligibility criteria as per 20 U.S.C. 1087ee(a)(2)(D). The court noted that while neither the Higher Education Act (HEA) nor DOE regulations defined “providing services,” the DOE clarified that it meant services that are “only,” “exclusively,” and “directly” aimed at low-income, at-risk children. The court upheld DOE's consistent interpretation that services must be both exclusive and direct, deeming it neither plainly erroneous nor inconsistent with regulations or the HEA. Additionally, the court ruled that the application of this policy to the Administration for Children’s Services (ACS) employees was not arbitrary or capricious, as these attorneys did not provide services “directly” to high-risk children.
The appeal followed this decision. The appellants appeared to meet the statutory qualifications for loan forgiveness as “full-time employees of a public, nonprofit child or family service agency” providing services to high-risk children from low-income communities. Legislative history indicated that the statute aimed to encourage qualified individuals to enter low-paying child and family service roles through cancellation subsidies.
Despite these qualifications, the DOE rejected loan forgiveness applications by applying a restrictive interpretation found in agency handbooks and informal communications. The DOE emphasized that services must be provided “only” to high-risk children, denying forgiveness if any services were rendered to individuals outside this definition. A Program Specialist later asserted that loan cancellation was only available for those providing services “directly” and “exclusively” to high-risk children, effectively disqualifying public interest attorneys representing these children, as their clients were seen as the city, not the children themselves. The DOE’s interpretation, while arguing for Chevron deference, did not utilize its regulations to define the statute’s meaning, as the regulation merely restated the statute verbatim. Chevron deference, if applicable, mandates court deference to agency interpretations unless they are found to be arbitrary, capricious, or contrary to the statute.
The Department of Education (DOE) argues for Skidmore deference regarding its handling of loan forgiveness, asserting that its interpretation should be respected based on the thoroughness, validity, consistency, and persuasive power of its reasoning. However, the District Court found that both parties acknowledged the DOE’s interpretation warranted "some weight" but did not determine the degree of deference owed. The court applied a "plainly erroneous" and "inconsistent with the regulation" standard when reviewing the DOE's conclusion. Chevron deference is deemed inapplicable to the DOE's interpretation of “providing services” to mean “only” and “exclusively” for high-risk children, as Chevron requires agency interpretations of statutes that Congress has entrusted to them. The DOE's argument relies on a presumption that Congress intended for agencies to resolve ambiguities in statutes, but the Supreme Court in Mead clarified that informal agency pronouncements do not merit Chevron deference, especially when not made through formal rule-making procedures. The qualifications introduced by the DOE were ad hoc and lacked formal backing, with the restriction on serving high-risk children originating from informal sources. Although the DOE claims to apply specialized experience when denying loan cancellation, the court disagrees, noting that the narrowing requirements imposed by the DOE do not constitute a legitimate agency interpretation.
The addition of the term "only" in the DOE Handbooks modifies the interpretation of the relevant statute, leading to a Skidmore analysis rather than Chevron deference. Skidmore respect is based on the thoroughness, validity, consistency, and persuasive power of informal agency interpretations. The DOE’s Handbooks from 1996-1997 and 2001-2002 specify that eligibility applies exclusively to those serving "only" high-risk children. However, a DOE Program Specialist's interpretation added the terms "exclusively" and "directly," which do not align with the original "only" and dilute its narrowing effect. For thoroughness to be established, the DOE must adhere to its Handbook language in practice. Additionally, a staff member without lawmaking authority or political accountability cannot provide the necessary macro perspective for thorough consideration. Past cases have shown deference to agency officials with substantial responsibility, but the current interpretation lacks the requisite expertise and authority as rule-making power was granted to the Secretary. The DOE's endorsement of the staff member’s interpretation during litigation fails to meet the standards of expertise and scrutiny needed for Skidmore respect. Validity in Skidmore analysis requires that an agency's pronouncement be well-reasoned and substantiated; a lack of coherent explanation or acknowledgment of policy shifts can invalidate the interpretation.
In Colaio v. Feinberg, the court held that a Special Master’s policies deserve Skidmore deference due to their support from credible evidence and reasoning. The Department of Education (DOE) argued for a narrowing of the criteria under 20 U.S.C. 1087ee(a)(2)(I) to differentiate between various support staff roles at child or family service agencies and those eligible for loan cancellation. However, the inclusion of the term “only” does not effectively achieve this goal. The DOE's requirement for “direct” service provision implies direct interaction with children, yet the statute also encompasses those working indirectly on behalf of children, such as supervisors and service providers for families.
The DOE's interpretation that public interest attorneys are excluded from qualification based on their government client undermines the statute, as all full-time employees at such agencies serve multiple beneficiaries. The statute allows loan cancellations for individuals providing services to high-risk children from low-income communities, where "low-income" is defined by community concentration rather than individual income level. The DOE's strict interpretation of “exclusively” disqualifies borrowers if even a small percentage of the children served do not meet the criteria, complicating administration and contradicting Congressional intent.
Additionally, the DOE has maintained that it does not make loan cancellation determinations but provides guidance to educational institutions that do. The court expressed reluctance to defer to the DOE's advisory interpretations, especially given the lack of authoritative decision-making and transparent reasoning in its guidance. Consequently, the DOE's additions of “only,” “directly,” and “exclusively” lack persuasive power and fail to demonstrate thorough consideration or valid reasoning.
The agency’s guidance on loan cancellation is not entitled to deference. Under 20 U.S.C. 1087ee(a)(2)(I), loan cancellation is available to full-time employees of nonprofit child or family service agencies who provide or supervise services for high-risk children from low-income communities. Congress anticipated that regulatory clarification would address the ambiguous elements of this provision, but the Secretary has not issued such guidance, leading to uncertainties that hinder both student career choices and institutional training efforts. The Department of Education (DOE) may hold institutions accountable for incorrect loan cancellations. The lack of authoritative policy from DOE employees necessitates reliance on the statutory language and congressional intent to encourage qualified individuals to incur educational debt for serving impoverished communities. Although the DOE argues for a restrictive interpretation, it is not mandated. The individuals De La Mota, Chungata, and Doron, as full-time nonprofit employees providing services to at-risk children, qualify for Perkins Loan cancellation. The judgment of the District Court is reversed, and the case is remanded for further proceedings in line with this opinion.
