Court of Federal Claims Continues Injunctions of Student Loan Debt Collection Contracts

The Court of Federal Claims continued preliminary injunctions because the court became aware of issues with the government’s student loan program, and it was necessary to preserve the status quo until the protests of the contract awards for debt collection services were resolved.

The court had issued the injunctions to protect the interests of all parties and afford the government an opportunity to reach a global solution. The injunctions were to remain in place until the government filed a notice of corrective action in response to a Government Accountability Office ruling that concluded some aspects of the evaluations were unreasonable.

While the injunctions were pending, the court became aware of press reports that a high-level official with the Department of Education resigned rather than testify before the House Oversight Committee about $3.86 billion in erroneous payments under the student loan program and $2.21 billion in Pell grants.

Another report concluded “[t]he value added by the private collection agencies working for the [DOE] is highly questionable[,] but unquestionably expensive.”

The government’s attorneys did not bring these developments to the court’s attention. The court continued “[o]f course, none of the counsel of record for the [protesters] did so either, because these reports belie numerous representations to the court about the ‘so-called’ harm to the student debtors and the public fisc from the preliminary injunction[s].”

Further, the government never responded to the court’s inquiry of another DOE official regarding whether the government could allow the incumbent protesters to continue servicing prior accounts until the government completed the proposed corrective action.

The court finally cited a New York Times article indicating that “the Administration is considering moving responsibility for overseeing more than $1 trillion in student debt from the [DOE] to the Treasury Department,” which would moot the protests.

The preliminary injunction would remain in place to preserve the status quo until the viability of the contracts at issue was resolved.

The court issued the ruling in six orders. A copy of one of them, along with the press reports, can be found here.

About William Van Huis

Bill Van Huis is a Senior Writer/Analyst for Wolters Kluwer Law & Business who tracks and analyzes new regulations impacting federal government contracting. He also follows court decisions involving bid protests and contract disputes. You can find his work in WK publications like Government Contract Reports and the FAR and DFARS Matrix Tools. Bill is a Certified Professional Contracts Manager, and he has a law degree from Southern Illinois University, where he graduated summa cum laude. Prior to joining WK, Bill worked both inside and outside state and local government in the areas of procurement and municipal finance. Bill also worked as a staff attorney for the Illinois Supreme Court.
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