This is a two part series studying various arguments against Congress being able to remove Public Service Loan Forgiveness from those who are current borrowers of eligible federal student loans. This first part will examine Constitutional arguments, while the second part will examine contract law arguments. A basic understanding of Public Service Loan Forgiveness can be found here.
Part. 1: Constitutional Constraints
Public Service Loan Forgiveness (“PSLF”) allows the unpaid balance of federal student loans to be forgiven once the current borrower has made 120 qualifying payments on their loans while working within a public service job. Though Congress passed a law creating PSLF in 2007, a current question exists about how a new law removing PSLF would affect those with existing loans.
It is important to note at the outset that the only presumable way Congress could attempt to remove PSLF protections for current borrowers would be to make a new law removing PSLF and then apply the law retroactively i.e. make the law apply to any and all loans existing loans eligible for PSLF. So the question we answer today is: Would applying this law retroactively be legal?
The first place to look will be the Constitution, which contains three main provisions barring retroactive legislation. Let’s explore each one:
Ex Post Facto Clause
Article 1, section 9 of the Constitution states that, “No…ex post facto Law shall be passed.” On the surface, a prohibition against Congress creating ex post facto laws would appear to prevent Congress from establishing legislation removing PSLF and then applying the legislation retroactively. “Ex post facto” is literally Latin for, “after the fact.” However, the Supreme Court has stated that Congress is only prohibited from passing retroactive legislation that pertains to criminal activity. As the removal of PSLF is not a criminal issue, the Ex Post Facto Clause would not prevent Congress from creating such a retroactive law.
Due Process Clause
The Due Process Clause states that, “no person shall…be deprived of life, liberty, or property, without due process of law…” This places a hurdle on Congress’ ability to pass retroactive legislation that would disrupt PSLF rights for education loans under existing contracts (MPNs) with the federal government. In order for Congress to pass retroactive legislation, Congress would only have to pass the “rational basis test” and show that the retroactive application of legislation abolishing PSLF serves a rational legislative purpose. Legal scholars have noted that the “rational basis test” is unfortunately, “notoriously easy to satisfy.”
Takings Clause
The Takings Clause of the Fifth Amendment asserts that property rights cannot be removed by the government unless for “public use,” and unless the property right owner receives “just compensation.” It is likely that PSLF protections under existing MPNs constitute property rights which, if removed by retroactive legislation, should be subject to protections under the Takings Clause.
There is one potential hurdle to PSLF being protected by the Takings Clause. Given that PSLF protections for current borrowers come from a contract with the federal government (MPNs), retroactive legislation removing present PSLF protections would likely provide grounds for a breach of contract claim (discussed in our next blog post). However, federal courts are unlikely to recognize a claim under the Takings Clause when other remedies under contract law exist. In other words, courts believe that the government has not taken property rights granted by a contract, even if one cannot acquire the property guaranteed by the contract, if the harmed contractual party could still do things like sue for damages. This means that if retroactive legislation disrupted PSLF protections guaranteed by student loan agreements and thus made one ineligible to retain their PSLF rights on existing student loans, that the courts would likely not consider the loss of PSLF as a violation of the Takings Clause if contract law remedies for the breach of the agreement still existed.
Conclusion
The Ex Post Facto, Takings, and Due Process Clauses serve as the traditional Constitutional barriers to Congress applying laws of any kind retroactively. However, as the discussion above proved, the constitutional constraints, while worth knowing, fail to serve as a strong barrier to Congress passing a law removing PSLF and applying it retroactively to current borrowers with loans eligible for PSLF.
Equal Justice Works provides support to public interest attorneys, and helps law students learn more about income-driven repayment plans and PSLF. We have a debt relief newsletter, free student debt webinars, and a free student debt e-book, Take Control of Your Future.
Kenneth Strickland is the Student Debt Specialist at Equal Justice Works. Here, he works to ensure that public interest legal jobs remain accessible to all who desire them by engaging in education, outreach, and policy analysis centered around ensuring that an affordable legal education remains an option for everyone. Ken is a recent graduate from the University of North Carolina School of Law, and has worked with reputable public service organizations such as North Carolina Advocates for Justice, American Civil Liberties of North Carolina, and the North Carolina Poverty Research Fund.