§ 1001 et seq., many ABA member banks have extended loans to students. The banks are approved as eligible lenders by Education and duly submit requests for payments of interest benefits and special allowances. Because Education has honored Treasury's requests for offsets, the full amounts requested by the banks have not always been paid.
II. Preliminary Issues
The defendant has challenged the plaintiff's standing to bring this action. In addition, Education argues that the relief sought is barred by sovereign immunity. The Court concludes that the plaintiff has standing and that the doctrine of sovereign immunity does not apply.
In challenging the ABA's standing, Education characterizes the relief sought as the equivalent of an award of money damages against the United States. Education argues that because the relief sought could require the payment of money from the Government to various banks for improper offsets, it is a claim for money damages with respect to which the ABA lacks standing. Where "the damage claims are not common to the entire membership, nor shared by all in equal degree" and where "whatever injury may have been suffered is peculiar to the individual member concerned, and both the fact and extent of injury would require individualized proof," associations generally lack standing. Warth v. Seldin, 422 U.S. 490, 515-16, 95 S. Ct. 2197, 2213-14, 45 L. Ed. 2d 343 (1975). The nature of the claims in this case, argues Education, requires the individual participation of the affected member banks.
The Court finds that argument unpersuasive. First, a mandamus claim, as here, is not transformed into a suit for damages merely because the writ could require the expenditure of money through a ministerial act. Starnes v. Schweiker, 715 F.2d 134, 142 (4th Cir. 1983); National Treasury Employees Union v. Nixon, 160 U.S. App. D.C. 321, 492 F.2d 587 (D.C. Cir. 1974). The obligation to pay interest subsidies and special allowances is ministerial in that it is nondiscretionary, clearly defined, and indisputable under the Higher Education Act. Second, the amounts of money owed under the HEA are known and undisputed and, therefore, Education readily was able to offset the amount allegedly due Treasury. It is the amounts due the Treasury that are disputed and subject to individualized proof and defenses. Those amounts are not material to the question at hand and do not affect the plaintiff's standing to challenge the Government's interpretation of the HEA and the DCA. Finally, the ABA has standing to sue on behalf of its members because it has alleged (1) that the banks have suffered injury in fact from Education's action, and (2) that such injury is within a zone of interests protected and regulated by the HEA. See Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970). The complaint states that certain member banks are entitled to interest subsidies and special allowances which have been withheld by Education. Those banks, as eligible lenders, "have a contractual right, as against the United States" to receive determined interest and special allowances. 20 U.S.C. §§ 1078(a)(3)(A), 1087-1(b)(3). It is only reasonable to believe that any remedy, if granted, will inure to the benefit of those members of the association actually injured by the offsets. See Warth v. Seldin, 422 U.S. at 515, 95 S. Ct. at 2213-14 (1975).
B. Sovereign Immunity
The doctrine of sovereign immunity which has been raised by Education has no applicability to this case. The Secretary of Education is subject to suit under the HEA. 20 U.S.C. § 1082(a)(2). The Administrative Procedure Act allows suit for other than relief in monetary damages. 5 U.S.C. § 702; National Treasury Employees Union v. Campbell, 191 U.S. App. D.C. 146, 589 F.2d 669, 673 n.7 (D.C. Cir. 1978). Where restitution is a logical adjunct to other primary equitable relief, it is available in the absence of a waiver of sovereign immunity. Griffin v. Harris, 480 F. Supp. 1072 (E.D. Pa. 1979). Finally, even if the doctrine applied, Congress, through the HEA, has appropriated funds for a specified purpose and directed Education to expend those funds in the manner set forth in the statute. Where Education has failed to expend those funds as directed, it has acted in excess of its statutory authority, which is a recognized exception to the doctrine of sovereign immunity. See Commonwealth of Pennsylvania v. Weinberger, 367 F. Supp. 1378 (D.D.C. 1973); City of New York v. Ruckelshaus, 358 F. Supp. 669, 673 (D.D.C. 1973).
The language of the HEA's Guaranteed Student Loan Program is direct and mandatory. In order to encourage institutions to provide low cost loans to students who otherwise would not be able to afford higher education, Congress has appropriated funds to be expended for interest subsidies and special allowances. A student to whom a loan is made under the Program "shall be entitled to have paid on his behalf . . . to the holder of the loan a portion of the interest. . . ." 20 U.S.C. § 1078(a)(1). "The holder of a loan with respect to which payments are required to be made . . . shall be deemed to have a contractual right, as against the United States, to receive from the Commissioner the portion of interest which has been so determined." 20 U.S.C. § 1078(a)(3)(A). "The Commissioner shall pay this portion. . . ." Id. "A special allowance shall be paid. . . ." 20 U.S.C. § 1087-1(b)(1).
Guarantees such as these are necessary incentives because even with the interest subsidies and special allowances, the banks' return on the loans is low. An inordinate amount of paperwork is required, first to process the loans and then to collect from Education. As stated in the plaintiff's affidavits, the banks' participation in the program is more "as a public service than as a profit making enterprise of the bank."
In contrast to the mandatory language of the HEA, the Debt Collection Act uses language of option and discretion. For example, the head of an agency shall "try to collect a claim of the United States" and after "trying to collect a claim," the head of an agency "may collect the claim by administrative offset." 31 U.S.C. §§ 3711(a)(1), 3716(a). That the authority to offset is merely discretionary further is illustrated by regulations issued pursuant to the DCA. One agency, such as Treasury, "may" refer the matter to another agency and "request" an offset. 31 C.F.R. § 240.7(a).
The strongest language qualifying the authority of the head of any agency to effect offset is provided by the Federal Claims Collections Standards:
Whether collection by administrative offset is feasible is a determination to be made by the creditor agency on a case-by-case basis, in the exercise of sound discretion. Agencies should consider not only whether administrative offset can be accomplished, both practically and legally, but also whether offset is best suited to further protect all of the Government's interests. * * * Agencies may also consider whether offset would tend to substantially interfere with or defeat the purposes of the program authorizing the payments against which offset is contemplated.
4 C.F.R. § 102.3(a)(2). This section imposes an obligation on agency heads to take into account the effect the offset would have on other Government programs. Therefore, only when Treasury has made a determination that an offset would not substantially interfere with or defeat the purposes of the program authorizing the payments against which the offset is contemplated may it request an offset by another agency. This section makes explicit the non-mandatory nature of the offset authority and the considerations involved in its exercise.
Once Treasury makes a request of another agency, the standards direct that "generally, agencies should not refuse to comply with requests from other agencies to initiate administrative offset to collect debts owed to the United States unless the requesting agency has not complied with the applicable provisions of these standards or the offset would be otherwise contrary to law." 4 C.F.R. § 102.3(d). Again, discretion must be exercised, this time by the offsetting agency, to ensure that the offset is in compliance with the Standards or not otherwise contrary to law. Thus, the offsetting agency must determine that in making the offset it is not substantially interfering with or defeating the purpose of a program that Congress has entrusted it to administer. The overriding theme of these regulations and of the DCA is that the collection of debts is to be encouraged and facilitated within the confines of established law, but not in contravention of other Government programs. Offset is a qualified and limited method of collection. In light of the strong language of the HEA and the possibility of frustrating its purpose, it is important that both Treasury and Education comply with all of the procedural requirements of the DCA and consider a requested offset's effect.
The procedural requirements of the DCA allow administrative offset only if the head of the agency attempting to collect provides the debtor:
(1) written notice of the type and amount of the claim, the intention of the head of the agency to collect the claim by administrative offset, and an explanation of the rights of the debtor under this section;
(2) an opportunity to inspect and copy the records of the agency related to the claim;