Sylvia Hsieh, The Daily Record Newswire
With huge numbers of students facing crushing debt and national student loans surpassing credit card debt, some lawyers have found a new niche: representing clients hounded by student loan creditors, debt collectors and loan servicers.
In some cases, these attorneys are supplementing their bankruptcy practices with advising clients about student loan debt. And consumer lawyers who handle Fair Debt Collection Practices Act (FDCPA) cases against other types of creditors are catering to clients who are in default on their student loans.
The upside for attorneys is that there’s a high demand.
“Everyone has student loans. It’s a uniquely American thing. There’s over a trillion dollars in student loan debt,” said Adam Minsky, a lawyer in Boston who graduated from law school in 2010. Minsky’s own student loan problems drew him into representing clients with similar issues.
“I’m seeing in the trenches a lot more problems with student loans,” said David Sugarman, a consumer attorney in Portland, Ore.
Such work can range from advising clients on their options for repaying student debt to suing debt collectors for violations of the FDCPA.
The challenge for private lawyers is finding ways to make money while representing economically strapped clients.
“Is it easy to figure out a way to make money? No, but it can be done. There are folks with pretty creative practices,” such as combining flat fees with hourly rates, said Deanne Loonin, an attorney at the National Consumer Law Center in Boston.
Robert Cocco, a Philadelphia-based consumer attorney who has three class actions pending against student loan debt collectors and is about to file a fourth, said it may be too soon to call student loan law a “niche.”
“It’s not a mature area of law because of limitations on ways to attack through a private right of action,” he said. “But there are always creative lawyers to find ways to open it up.”
Referrals from bankruptcy lawyers
In 2008, when Joshua Cohen hung out his solo shingle not long after passing the bar, he knew he wanted to focus on student loan law.
Cohen’s interest in the practice area was sparked in his second year of law school during a stint with Connecticut Legal Services, where he represented an elderly client whose Social Security benefits were being offset due to a trucking school loan.
Cohen had also worked for a consumer law firm tackling FDCPA violations.
With his solo practice just off the ground, he sent letters to bankruptcy attorneys seeking referrals of student loan cases.
“Before I knew it, I was inundated,” said Cohen, whose practice is based in Hartford, Conn.
Cohen now lectures on student loan law to encourage other lawyers to become interested in the practice area.
“Consumer attorneys and bankruptcy attorneys are already sitting on the clients. They just don’t know what to do with them,” Cohen said. “It’s an added revenue stream that can’t be included in the bankruptcy.”
Understanding the nuances
The law of student loans is a labyrinth within the Higher Education Act and the federal regulations, which dictate the ins and outs of how student loans are handled, consolidated and collected.
“Student loan law is very much like bankruptcy. If you don’t understand all the nuances, you are doing a disservice to your clients,” said Cohen.
For example, one of the first things a lawyer should evaluate is whether a client with student loan debt can discharge or cancel it under certain circumstances, such as total and permanent disability, a school closing while the student was enrolled, or special exceptions for veterans, teachers or health care providers, according to Heather Jarvis, a student loan expert and lecturer based in Wilmington, N.C.
Because the statute and regs are not well understood, violations are easy to find, Cohen said.
A common error is that loan servicers typically offer borrowers the option to consolidate their loans, but do not offer “rehabilitation” — another option that removes the default from the borrower’s credit report and sets a “reasonably affordable” monthly payment based on the regulations.
“Consolidation is quick, easier and [debt collectors] get their money faster,” said Cohen.
“Debt collectors are not offering rehabilitation at all,” agreed Cocco.
And even when rehabilitation is offered, he added, collectors often make other errors under the regs, such as requiring an unreasonable payment or a consecutive nine months of payment for federal loans when the regs require only nine out of 10 months, but not consecutively.
Can you make money?
Some clients are willing to pay to get legal advice about their options for dealing with student loan debt and to have a lawyer negotiate with unfriendly, error-prone loan servicers or debt collectors on their behalf.
“I don’t think it’s unreasonable for borrowers who are not financially destitute to spend some money for a lawyer to help them deal with their loans,” said Jarvis, who graduated from law school with $125,000 in student loans but took her dream job as a low-paid death penalty defense attorney at a nonprofit.
She now gets paid by schools to lecture and train students, particularly graduate students in professions such as law and medicine, about the law of student debt.
Another business model is to litigate borrowers’ claims under statutes providing a private cause of action and fee-shifting provisions, such as the FDCPA, state debt collection laws and state consumer laws.
But these statutes also have restrictions, Cocco warns, noting in particular that the FDCPA includes a one-year statute of limitations and an exemption from suit for loan servicers.
Cohen said he charges $500 to $3,000 per client on average, depending on how much research is required on a given issue or how much time he has to spend negotiating with loan servicers for the client.
That does not include work for FDCPA violations he finds.
“Here’s what’s fun about this: For all my clients, it’s about solving problems. FDCPA is just gravy,” Cohen said. “I don’t bring clients in because I’m looking for FDCPA violations, but I find [violations in] 50 to 80 percent” of cases.
