Summary
The Alaska Supreme Court affirmed the denial of Leland Rubey's request to cancel four Alaska education loans based on total and permanent disability. The court held that the loan-origination-fee statute, applicable regulations, and Rubey's promissory notes did not create a right to medical cancellation. It also upheld the Alaska Commission on Postsecondary Education's discretion to issue loans with or without medical-cancellation provisions and concluded that the governing regulation was valid.
Topics
Practice areas
Questions Presented
- Whether AS 14.43.120(u), which authorizes loan origination fees to offset losses arising from borrower disability and other events, creates a statutory right to medical cancellation of student loans.
- Whether 20 AAC 15.920 or 20 AAC 15.915 creates a regulatory right to medical cancellation when the promissory notes contain no medical-cancellation provision.
- Whether ACPE's decision to stop including medical-cancellation provisions in promissory notes constituted a policy change requiring formal Administrative Procedures Act rulemaking.
- Whether 20 AAC 15.920 is invalid or arbitrary because it limits medical-cancellation procedures to loans whose promissory notes contain cancellation provisions.
Holdings
- AS 14.43.120(u) does not provide borrowers with a right to medical cancellation of their student loan obligations.
- Neither 20 AAC 15.920 nor 20 AAC 15.915 entitles Rubey to medical cancellation of his student loans.
- ACPE's decisions to include medical-cancellation provisions in some pre-1996 promissory notes and to eliminate those provisions beginning in 1996 were exercises of discretionary business judgment, not policies requiring formal Administrative Procedures Act rulemaking.
- 20 AAC 15.920 is a valid, properly promulgated regulation and is not arbitrary or capricious merely because it applies only to loans containing medical-cancellation provisions.
Key quotations
“We conclude that they do not, and we affirm the denial of the recipient's request for medical cancellation of his loan obligations.” (413)
“It simply does not follow from the legislature's creation of a fund to offset losses that it therefore intends to forgive a certain class of debts.” (417)
“Because there is no statutory or regulatory right to medical cancellation, Rubey is not entitled to have his student loan obligations cancelled due to medical disability.” (418)
Factual background
Between 1996 and 1998, Leland Rubey received four education loans from the Alaska Commission on Postsecondary Education. None of the promissory notes contained a provision allowing medical cancellation, although some pre-1996 ACPE loan notes had included such provisions. After Rubey was diagnosed with a total and permanent disability, he requested cancellation of the loans, arguing that statutory loan-origination fees intended to offset losses from borrower disability implied a right to cancellation.
Procedural history
ACPE denied Rubey's medical-cancellation request. Following a hearing officer's summary-adjudication decision concluding that Rubey's promissory notes lacked medical-cancellation provisions and that the governing origination-fee statute created no independent cancellation right, the superior court affirmed. The Alaska Supreme Court reviewed the agency decision directly and affirmed.