Bible v. United Student Aid Funds, Inc.
United States Court of Appeals for the Seventh Circuit
799 F.3d 633 (2015)
Bible (plaintiff) defaulted for the first time on a federally guaranteed student loan; United Student Aid Funds (defendant), the guarantor, paid off the loan and entered a rehabilitation agreement with Bible within 60 days for reduced monthly payments. Bible complied with the agreement's terms, but United still charged her over $4,000 in collection fees. Bible sued for breach of contract, arguing the loan agreement incorporated the Higher Education Act (HEA) and its regulations, which she claimed barred such fees under these circumstances. The district court dismissed her claim, reasoning the HEA preempted any private suit and, alternatively, that the HEA permits collection costs on defaulted loans.
Whether, under the Higher Education Act and its implementing regulations, a guaranty agency is barred from imposing collection costs on a borrower who timely enters into and complies with a rehabilitation agreement after a first-time default.