Nigro v. Pa. Higher Educ. Assistance Agency
| Decision Date | 08 September 2020 |
| Docket Number | Civil No. 1:19-CV-02000 |
| Parties | KEITH M. NIGRO, Plaintiff, v. PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, Defendant. |
| Court | U.S. District Court — Middle District of Pennsylvania |
MEMORANDUM
This case arises from alleged improprieties in connection with the servicing of federal student loan debt. Plaintiff Keith M. Nigro ("Nigro") alleges that the servicer of his student loans, Defendant Pennsylvania Higher Education Assistance Agency ("PHEAA"), is liable to him for unjust enrichment; unfair and deceptive trade practices in violation of the Consumer Financial Protection Act ("CFPA") and Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"); and violation of his constitutional right to due process. The case is presently before the court on PHEAA's motion to dismiss. For the reasons that follow, the motion is granted. Nigro's unjust enrichment, CFPA, and due process clams are dismissed with prejudice, and his UTPCPL claim is dismissed without prejudice.
Under the Higher Education Act of 1968, Pub. L. No. 89-329, 79 Stat. 1219 () [hereinafter "HEA" or "the act"], the United States Department of Education ("the Department") has the power to issue federal loans to qualified student borrowers. See 20 U.S.C. §§ 1078, 1078-2, 1078-3, 1078-8, 1087a. Although such loans are issued by the Department, the HEA requires the Department to "award contracts for origination, servicing, and collection" of the loans "to the extent practicable." Id. § 1087f(a)(1). Once the Department has entered into a contract with a lender, the Department may suspend or terminate the lender's participation in the loan program if the lender has not complied with applicable statutes and regulations. 34 C.F.R. §§ 682.705-682.706.
The Public Service Loan Forgiveness Program ("PSLF") was created as part of the HEA to provide loan forgiveness to individuals working in qualified public service jobs. See 20 U.S.C. § 1087e(m)(1). Under the PSLF, the Department is directed to forgive all principal and interest due on a federal direct loan if the borrower (a) has made 120 qualified monthly payments on the loan; (b) has worked in a qualified public service job during the time in which those 120 payments were made; and (c) continues to work in a qualified public service job at the time of the loan forgiveness. Id.
This case was first filed as a petition for review with the Commonwealth Court of Pennsylvania on October 16, 2019, pursuant to that court's original jurisdiction under 42 Pa.C.S. § 761(a). (Doc. 1-2.) PHEAA removed the case to this district on November 21, 2019, pursuant to the federal officer removal statute, 28 U.S.C. § 1442. (Doc. 1.) PHEAA filed an answer on November 27, 2019, after which Nigro filed an amended complaint on December 17, 2019. (Docs. 2, 8.)
According to the allegations in the amended complaint, Nigro is a resident of Cumberland County, Pennsylvania who has, since 2007, been employed in public service positions sufficient to qualify him for loan forgiveness under the PSLF. (Doc. 8 ¶ 2.) PHEAA is a "quasi-governmental entity" located in Harrisburg, Pennsylvania that serves as a contractor of the Department to service federal student loans. (Id. ¶¶ 3, 5.) PHEAA services many of those federal loans through its "alter ego," FedLoan Servicing ("FedLoan"). (Id. ¶ 7.)
In seeking relief before the Commonwealth Court, Nigro alleged, among other things, that PHEAA wrongfully initiated administrative forbearances1 when servicing his loans between March 2012 and December 2012. (Id. ¶ 11.) Duringthese forbearances, Nigro "was not only prevented from making timely payments, but was also prevented later from making up retrospectively payments to cover forced interruption of payments." (Id.)
In response to Nigro's filing before the Commonwealth Court, PHEAA asserted that it had not serviced Nigro's student loans prior to March 12, 2018 and demanded that Nigro withdraw his case before the Commonwealth Court on that basis. (Id. ¶ 13.) According to the amended complaint, however, the assertion that PHEAA had not serviced Nigro's loans prior to March 12, 2018 was factually inaccurate, as proven by statements that PHEAA had previously made to Nigro. (Id. ¶ 17.) The amended complaint asserts that contrary to PHEAA's contention, it had serviced Nigro's loans from February 10, 2010 to March 12, 2012, and accordingly was servicing Nigro's loans during the period when several of the administrative forbearances allegedly occurred. (Id. ¶ 23.)
The amended complaint alleges that at all times prior to February 10, 2010, Nigro's loans had been serviced by Affiliated Computer Services ("ACS"), which was an affiliate of the Xerox Corporation. (Id. ¶ 24.) PHEAA then serviced Nigro's loans from February 10, 2010 to March 12, 2012, at which point the loans were transferred back to ACS. (Id. ¶ 28.) The loans remained with ACS until July 4, 2013, when they were transferred to a company called Nelnet. (Id.) Nelnetcontinued to service the loans until March 2018, at which point it transferred them back to PHEAA. (Id. ¶ 29.)
The amended complaint alleges that PHEAA committed a series of wrongs during the period in which it was allegedly servicing Nigro's loans. According to the amended complaint, Nigro made a payment of $7,500 to PHEAA on December 13, 2010, which was purportedly allocated towards payment of interest. (Id. ¶ 31.) Despite that allocation, however, there was no documentation indicating that the $7,500 was actually applied to the interest on Nigro's loans. (Id. ¶¶ 33-34.)
The amended complaint alleges that PHEAA wrongfully increased the principal owed on Nigro's loans by $12,667.24 during the period spanning 2010 to 2012. (Id. ¶ 47.) This increase was due to a series of "administrative events and intrusions" by PHEAA "consisting of 11 documented instances of administrative capitalization of interest into larger principal; 10 administrative loan consolidations; and 8 administrative conversions." (Id. ¶ 48.)
Nigro's loans were then subjected to twenty additional month-long forbearances between March 2012 and early 2019, "which shut the payment process down, subtracted a month of qualified public service, and triggered capitalization of interest so as to raise the principal" of Nigro's loans. (Id. ¶ 52.) The majority of these forbearances were initiated not by Nigro's actions but rather by administrative actions of the loan servicer. (Id. ¶ 53.)
The amended complaint alleges that there were at least four payments made and received between 2012 and 2019 that were never properly credited towards Nigro's loans. (Id. ¶ 55.) Specifically, the amended complaint alleges that on May 6, 2014, Nigro made a payment of $86.90, which was double the amount owed, but that the payment was not credited as an eligible payment for purposes of Nigro's loan forgiveness. (Id. ¶ 56.) Payments made on May 18, 2015, January 6, 2017, and March 13, 2017, were similarly not credited as eligible payments under Nigro's loans. (Id. ¶¶ 57-59.) The amount of those payments were, respectively, $165.42, $177.33, and $120.00. (Id.) Similarly, the amended complaint alleges that on May 16, 2017, Nigro submitted a payment of $116.44 to cover the months of April 2017 and May 2017, and that the payment was treated as an eligible payment for purposes of May 2017 but not for the purposes of April 2017. (Id. ¶ 60.)
The alleged misapplication of funds continued into 2019, when PHEAA deemed two payments ineligible for debt relief purposes on the grounds that Nigro had purportedly failed to submit proper certification that he was working in a certified public service position. (Id. ¶ 62.) The amended complaint alleges that every forbearance led PHEAA to extend the term of Nigro's loans and extend the term in which he was required to work in public service. (Id. ¶ 63.)
As of November 2019, PHEAA had increased the amount of Nigro's monthly payment from $109.22 to $244.00 based on its conclusion that he had recently entered into an income-driven repayment plan. (Id. ¶¶ 70-71.) That conclusion, however, was erroneous, because Nigro had always been in an income-driven repayment plan and had not changed his status at any point leading up to the November 2019 increase. (Id.)
The amended complaint further alleges that the parties dispute the date on which Nigro's eligible public service began. PHEAA allegedly asserts that Nigro's eligible public service began in March 2012, while Nigro asserts that his eligible public service began in 2007. (Id. ¶ 74.)
In addition to the misapplied payments, the amended complaint alleges that PHEAA and the other servicers of his loan have erroneously listed some of his loan accounts under the misspelled name "Keith Nitro." (Id. ¶ 76.) The first such accounting error occurred in 2012 and was promptly corrected, but Nigro discovered another similar accounting error shortly before the amended complaint was filed, when he was "not allowed to proceed except as Keith Nitro" in recertifying information for his loans. (Id. ¶¶ 77-78.)
Although PHEAA did not service Nigro's loans during all relevant times, the amended complaint alleges that PHEAA acknowledged "full authority and responsibility" to equitably adjust the loans even for periods in which it was notthe loan servicer when it recast two forbearances that occurred in 2015 and 2017 as one-day forbearances and restored two months of loan forgiveness time to Nigro's loans. (Id. ¶¶ 54, 81.)
The amended complaint raises three causes of action. In Count I, Nigro raises a cause of action for unjust enrichment. (Id. ¶¶ 97-107.) In Count II, Nigro raises a cause of action for unfair and deceptive trade practices in violation of the CFPA and the UTPCPL. (Id. ¶¶ 108-18.) In Count III, Nigro raises a cause of action under 42 U.S.C. § 1983 for violation of his right to due...
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