59 F. Supp.2d 115 (1999) | Cited 0 times | D. Maine | August 3, 1999


Plaintiff the United States of America ("Plaintiff") hasbrought suit against Defendant Kenneth G. Dwelley ("Defendant")to recover amounts owed on his student loans. Before the Court isPlaintiff's Motion for Summary Judgment. For the reasons outlinedbelow, the Motion is GRANTED.


Summary judgment is appropriate in the absence of a genuineissue as to any material fact and when the moving party isentitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Anissue is genuine for these purposes if "the evidence is such thata reasonable jury could return a verdict for the nonmovingparty." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106S.Ct. 2505, 91 L.Ed.2d 202 (1986). A material fact is one thathas "the potential to affect the outcome of the suit under theapplicable law." Nereida-Gonzalez v. Tirado-Delgado,990 F.2d 701, 703 (1st Cir. 1993). Facts may be drawn from "the pleadings,depositions, answers to interrogatories, and admissions on file,together with the affidavits." Fed.R.Civ.P. 56(c). For thepurposes of summary judgment the Court views the record in thelight most favorable to the nonmoving party. See McCarthy v.Northwest Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995).


On February 10, 1983 and January 15, 1984, Defendant executedtwo promissory notes through the Maine Savings Bank, both in theamount of $4,500.00. (Pl.'s Exs. A.1 and A.2.) These notes wereguaranteed by United Student Aid Funds, Inc. ("United"), and werereinsured by the Department of Education ("DOE") under loanguaranty programs authorized under Title IV-B of the HigherEducation Act of 1965, as amended, 20 U.S.C. § 1071 to 1087-2.(Pl.'s Ex. C.)

The terms of the notes required repayment to commence sixmonths after Defendant ceased carrying at least one-half thenormal full-time academic workload at an eligible institution. Atsome point, these criteria were satisfied and Maine Savings Bank,the holder, demanded payment according to the terms of the notes.Defendant made some payments,1 but on or about February 5,1991, he defaulted.2 (Pl.'s Ex. C.) He requested a deferment,but the request was denied on the grounds that his defaultprecluded deferment under the terms of the notes.

At some point, Maine Savings Bank filed a claim on theguaranty, and United paid Maine Savings Bank the outstanding loanbalance. (Pl.'s Ex. C.) At that time, the notes were assigned toUnited. On May 14, 1997, after unsuccessful collection efforts byUnited, the notes were assigned to the DOE. The DOE demandedpayment, but Defendant did not pay. The DOE then forwarded itsclaim to the Department of Justice for litigation.

As of October 12, 1998, Defendant is indebted to the DOE in theamount of $5,764.77 in principal and $2,658.62 in interest, for atotal amount of $8,423.39. Interest has accrued since October 12,1998, at the rate of 7.00% per annum. (Pl.'s Ex. B.)

Plaintiff seeks judgment in the form of the $8,423.39 principaland interest owed through October 12, 1998; pre-judgment interestdating from October 12, 1998 through the date of judgment at therate of 7.00% per annum; the $150.00 filing fee mandated by28 U.S.C. § 1914(a); and any other relief the Court deemsappropriate. It further demands, pursuant to 28 U.S.C. § 1961,that interest on the judgment accrue at the legal rate until itis paid in full.

Plaintiff's Motion for Summary Judgment was filed on June 8,1999. Defendant's Response was due on June 25, 1999. Defendant,who is proceeding pro se, did not submit a Response until August2, 1999, just as the Court was preparing to docket this Order.Under the circumstances, according to Local Rule 7(b), Defendanthas waived any objection to Plaintiff's Motion for SummaryJudgment. The Court will, however, briefly address theaffirmative defenses raised in Defendant's Answer in addition tothe arguments raised by Defendant's untimely Response.


A. The Answer

In his Answer, Defendant asserts nine affirmative defenses,each of which fail.

1. Failure to State a Claim

Defendant's contention that Plaintiff's Complaint fails tostate a claim upon which relief can be granted is specious. TheComplaint clearly states a claim.

2. Lack of Subject Matter Jurisdiction

Contrary to Defendant's assertion, the Court has subject matterjurisdiction over this action because the United States is theplaintiff. See 28 U.S.C. § 1345 (1994).

3. Constitutional Violation

In his third affirmative defense, Defendant appears to arguethat Plaintiff's claim is barred by the Fifth and FourteenthAmendment of the Constitution since requiring him to repay hisloans would constitute a deprivation of property without dueprocess and a taking without just compensation. This defensefails as a matter of law for reasons to numerous too detail.

4. Statute of Limitations

Defendant's position that Plaintiff's claim is barred by asix-year statute of limitations governing breach of contractactions is in error. There is no statute of limitationsapplicable to the federal government's collection of studentloans. See 20 U.S.C. § 1091a(a) (1994); see also United Statesv. Smith, 811 F. Supp. 646, 647-48 (S.D.Ala. 1992) (discussingelimination of statute of limitations by virtue of HigherEducation Technical Amendments Act of 1991).

5. Laches

Although the federal government may, in certain circumstances,be subject to the defense of laches in the context of studentloan collection, see United States v. Rhodes, 788 F. Supp. 339,342-43 (E.D.Mich. 1992) (holding seventeen year delay incollection effort caused material prejudice to defendant becauserelevant records were no longer accessible and therefore lachesbarred claim), this defense fails in this case because there isno indication that Defendant has been materially prejudiced bythe delay here. See United States v. McLaughlin, 7 F. Supp.2d 90,92-93 (finding no evidence of "special hardship" to supportlaches defense in student loan collection action); United Statesv. Davis, 817 F. Supp. 926, 930 (M.D.Ala. 1993) (finding lachesdid not bar student loan collection action because defendant wasnot materially prejudiced by delay).

6 and 7. Due Process and Equal Protection Violations

Defendant argues that 20 U.S.C. § 1091a(a)(2), which eliminatesa statute of limitations in student loan collection actions likethis one, violates the Fourteenth Amendment guarantees of dueprocess and equal protection, presumably because it appliesretroactively. In support of this claim, he alleges thatelimination of the statute of limitations "has worked a specialhardship and has had an oppressive effect on [him] under thecircumstances of this case." (Def.'s Answer at 2.) He has notproduced on summary judgment, however, any evidence of specialhardship or oppressive effect in his case. Therefore, thesedefenses fail. See McLaughlin, 7 F. Supp.2d at 91 (denyingstudent borrower's motion to dismiss based on absence ofallegation of special hardship, among other considerations).

8. Contract

Defendant asserts that Plaintiff's claim is defeated by theterms of the promissory notes, Paragraph VIII of which providesfor a deferment option. This deferment provision, however,clearly states that a debtor may be considered for deferment onlyif he is not in default. (Pl.'s Exs. A.1 and A.2.) SinceDefendant has been in default since February of 1991, he cannotenjoy the benefit of the deferment option under the terms of thenote.

9. Ex Post Facto Violation

Defendant claims that 20 U.S.C. § 1091a(a)(2) violates the ExPost Facto clause because it applies retroactively. Hisinvocation of the Ex Post Facto clause in this case isinappropriate because that prohibition applies only to criminalor penal measures that are applied retroactively.

B. The Response

A liberal reading of Defendant's Response reveals essentiallytwo arguments. First, he asserts that the DOE did not exercisedue diligence in its collection efforts as required by20 U.S.C. § 1080(a)(d) and related regulations.3 These provisions setforth a number of conditions that must be satisfied by a lenderbefore it may tender a claim to the United States for payment.The issue of whether a student debtor may invoke the lender's duediligence obligations against the federal government on his orher own behalf is a question of first impression in this Circuit.The weight of authority from other jurisdictions, however,indicates that these provisions are in place solely to govern therelationship between insured lenders and the United States andtherefore do not enable a cause of action for student borrowers.See United States v. Singer, 943 F. Supp. 9, 12 (D.D.C. 1996),aff'd in part, rev'd in part on other grounds, 132 F.3d 1482(D.C.Cir. 1997) ("The statute and regulations do not, however,give the borrower any basis for avoiding his debt based on thefailure of the lender to properly service the loans"); UnitedStates v. Smith, 862 F. Supp. 257, 261 (D.Haw. 1994) ("The duediligence statutes exist for the government's benefit, to ensurethat the lender seeks recovery from the borrower before thelender makes a claim against the insurance. . . . [T]he borrowerdoes not have the right to void his debt simply because he is nowdissatisfied with the lender's collection efforts."); Phillipsv. Pennsylvania Higher Educ. Assistance Agency, 497 F. Supp. 712,723 (W.D.Pa. 1980), rev'd on other grounds, 657 F.2d 554 (3rdCir. 1981) ("It would be anomalous to hold that a provisionenacted for the benefit of the federal government creates aprivate cause of action for defaulting students.").

Only the Eastern District of Michigan has analyzed, on themerits, a student debtor's claim that the government has failedto exercise due diligence in its collection efforts. See UnitedStates v. Robbins, 819 F. Supp. 672, 679 (E.D.Mich. 1993)(holding that sending only four letters to student as collectioneffort did not constitute lack of diligence); United States v.Rhodes, 788 F. Supp. 339, 343 (E.D.Mich. 1992) (granting studentdebtor's motion for summary judgment because, among other things,government failed to produce evidence of lender's collectionefforts). In neither of these cases was the appropriateness ofsuch a defense or cause of action analyzed.

In light of the authority outlined above, the Court ispersuaded that Defendant may not defeat Plaintiff's claim basedon asserted lack of due diligence.

Second, Defendant argues that he was entitled to a forbearanceunder 20 U.S.C. § 1080(c). Section 1080(c) is situated withinprovisions relating to default and reads:

Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary, or to preclude forbearance by the Secretary in the enforcement of the insured obligation after payment on that insurance. Any forbearance which is approved by the Secretary under this subsection with respect to the repayment of a loan, including a forbearance during default, shall not be considered as indicating that a holder of a federally insured loan has failed to exercise reasonable care and due diligence in the collection of the loan.

20 U.S.C. § 1080(c) (1994). Nothing in this provision indicatesthat Defendant, or any student borrower, is entitled to aforbearance. Rather, it merely states that forbearance may beavailable under the circumstances specified — none of which applyin this case — and discusses the relevance of any forbearance tothe evaluation of a holder's due diligence. Therefore,Defendant's second position is also without merit.


For the reasons discussed above, Plaintiff's Motion for SummaryJudgment is GRANTED. Judgment is ordered for Plaintiff in theamount of (i) $8,423.39 in principal and interest owed throughOctober 12, 1998, (ii) pre-judgment interest dating from October12, 1998 through the date of judgment at the rate of 7.00% perannum, and (iii) the $150.00 filing fee mandated by28 U.S.C. § 1914(a). Pursuant to 28 U.S.C. § 1961, interest on the judgmentshall accrue at the legal rate until it is paid in full.


1. Maine Savings Bank received $3,636.39.00 from Defendant andcredited that amount to the principal owed on the loan. (Pl.'sEx. C.) Defendant has produced no evidence indicating that hepaid off more than $3,636.39.00 in principal prior to hisdefault. He merely states that before defaulting, he had paid offapproximately half of his loan obligation.

2. Defendant explains that he defaulted after being seriouslyinjured in an automobile accident in September 1990.

3. Although Defendant identifies the DOE as the delinquentparty, the Court presumes he is referring to United, which heldthe note from some point after Defendant's default through May14, 1997, when it was assigned to Education.

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