Ascendium Education Solutions, Inc. v. Miguel Cardona

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 15, 2022 Decided August 29, 2023

No. 22-5104

ASCENDIUM EDUCATION SOLUTIONS, INC.,
APPELLEE

v.

MIGUEL A. CARDONA, IN HIS OFFICIAL CAPACITY AS
SECRETARY OF THE DEPARTMENT OF EDUCATION AND
DEPARTMENT OF EDUCATION,
APPELLANTS

Consolidated with 22-5117

Appeals from the United States District Court
for the District of Columbia
(No. 1:19-cv-03831)

Steven H. Hazel, Attorney, U.S. Department of Justice,
argued the cause for appellants/cross-appellees. With him on
the briefs were Brian M. Boynton, Principal Deputy Assistant
Attorney General, and Mark B. Stern, Attorney.

Kevin M. St. John argued the cause and filed the briefs for
appellee/cross-appellant.
 2

Before: WILKINS, WALKER and PAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge PAN.

Concurring opinion filed by Circuit Judge WALKER.

PAN, Circuit Judge: When Congress passed the Higher
Education Act of 1965 (the “Act”), 20 U.S.C. §§ 1001–1155,
it created the Federal Family Education Loan Program
(“FFELP” or “Program”), see id. § 1071–1087-4. The FFELP
incentivized financial institutions to lend money to borrowers
with poor credit or low incomes by establishing a network of
guarantors, which would protect against the risk of those
borrowers failing to repay their Program loans. See id.
§ 1071(a); Bible v. United Student Aid Funds, Inc., 799 F.3d
633, 640 (7th Cir. 2015). When borrowers default on loans
issued under the Program, guarantors purchase the loans from
the lenders and then try to collect the debts from the borrowers.
See Bible, 799 F.3d at 640–41. The guarantors, in turn, are
reinsured by the federal government. See id.; see also 20
U.S.C. § 1078(c); 34 C.F.R. § 682.404.

The Act permits guarantors to charge some debt-collection
costs to defaulting borrowers. See 20 U.S.C. §§ 1091a(b)(1),
1078-6. But in 2019, the Department of Education issued the
Rule at issue in this case — 34 C.F.R. § 682.410(b)(2)(i) —
which prohibits guarantors from assessing any costs against
borrowers who take steps to end their default status within 60
days, by agreeing to repay or to rehabilitate their loans. See
Student Assistance General Provisions, Federal Family
Education Loan Program, and William D. Ford Federal Direct
Loan Program, 84 Fed. Reg. 49,788, 49,926 (Sept. 23, 2019)
(codified at 34 C.F.R. pts. 668, 682, 685).
 3
Ascendium Education Solutions (“Ascendium”) is a
Program guarantor that previously charged debt-collection
costs to defaulting Program borrowers who entered loan-
rehabilitation agreements. Ascendium challenged the Rule
under the Administrative Procedure Act (“APA”), arguing that
the Department of Education and its Secretary (collectively,
the “Department”) did not have statutory authority to
promulgate the Rule because the Rule conflicts with the Act.
The district court ruled that Ascendium lacked standing to
challenge the Rule as it applies to borrowers who enter
repayment agreements because Ascendium did not charge such
borrowers for any collection costs. But the district court held
that the Rule exceeded the Department’s authority under the
Act with respect to borrowers who enter rehabilitation
agreements. Both Ascendium and the Department appealed.

For the following reasons, we conclude that Ascendium
has standing to challenge the entirety of the Rule, that the Rule
is consistent with the Act and therefore is lawful, and that the
Rule is not arbitrary or capricious. Accordingly, we reverse in
part and affirm in part the judgment of the district court.

I.

A.

The Program’s system of loan guarantees is activated
when a borrower enters default. 1 See Bible, 799 F.3d at 640–
41. Borrowers are in default on their loans when they fail to
make payments to their lenders for at least 270 days. 20 U.S.C.
§ 1085(l). At that point, “the guarantor reimburses the lender

1
New loans have not been issued under the Program since 2010,
but borrowers still have loans that previously were issued, and
lenders and guarantors continue to collect payments on those loans.
See 20 U.S.C. § 1071(d)(1).
 4
for the amount of its loss,” 34 C.F.R. § 682.102(g), and the
guarantor begins the process of trying to collect the money
owed by the borrower, id. §§ 682.102(g), 682.410(b)(6). A
guarantor or “guaranty agency” can be a state or a private
nonprofit organization. 20 U.S.C. §§ 1078(b), 1085(j).

Within 45 days of taking over a defaulted loan, a guaranty
agency must “[a]dvise the borrower that the agency has paid a
default claim filed by the lender and has taken assignment of
the loan.” 34 C.F.R. § 682.410(b)(5)(vi)(A). In that same
notice, the guarantor must “[d]emand that the borrower
immediately begin repayment of the loan,” id.
§ 682.410(b)(5)(vi)(D), and “[i]nform the borrower of the
options that are available to the borrower to remove the loan
from default,” id. § 682.410(b)(5)(vi)(M), (b)(6)(iv).
Additionally, either in that notice or separately, the guaranty
agency must “provide the borrower with . . . [a]n opportunity
to enter into a repayment agreement on terms satisfactory to
the agency,” id. § 682.410(b)(5)(ii)(D), and “notify the
borrower . . . that if he or she does not make repayment
arrangements acceptable to the agency, the agency will
promptly initiate procedures to collect the debt,” id.
§ 682.410(b)(6)(ii). Sixty days after providing that required
notice, a guaranty agency may begin reporting the borrower’s
unpaid debt to consumer credit reporting agencies, id.
§ 682.410(b)(5)(i), (b)(5)(iv)(B); start proceedings to garnish a
borrower’s federal tax refunds or other government payments,
id. § 682.410(b)(6)(v); or bring a civil suit, id.
§ 682.410(b)(6)(vii). The 60-day period before the guarantor
can take those actions is known as the “initial default period.”

Borrowers can remove their loans from default in two
ways relevant here. First, any borrower can “enter into a
repayment agreement on terms satisfactory to the [guaranty]
agency.” 34 C.F.R. § 682.410(b)(5)(ii)(D). Second, some
 5
borrowers can rehabilitate their loans, a process that requires
them to make nine timely payments in ten consecutive months.
20 U.S.C. § 1078-6(a); 34 C.F.R. § 682.405(b)(1). The
payments must be “[r]easonable and affordable” and may be as
low as $5.00. 34 C.F.R. § 682.405(b)(1)(i)(D), (b)(1)(iii).
Once a loan is rehabilitated, it is no longer in default and the
guaranty agency must sell the loan back to a traditional lender
or assign the loan to the Department. 20 U.S.C. § 1078-
6(a)(1)(A).

Section 1091a of the Act mandates that the reasonable
costs of collecting on a defaulted loan must be passed on to
borrowers. It provides: “[A] borrower who has defaulted on a
loan made under [the Program] shall be required to pay . . .
reasonable collection costs.” 20 U.S.C. § 1091a(b)(1).
Regulations promulgated by the Department generally place a
cap on collection costs. Borrowers may be required to pay the
lesser amount of (1) a percent of the average costs for all
defaulting borrowers, see 34 C.F.R. § 30.60(c)(1); or (2) what
the borrower would be charged if the loan were held by the
Department, id. § 682.410(b)(2)(iii). But when a borrower
completes a rehabilitation agreement under the Program, “the
guaranty agency . . . may, in the case of a sale made on or after
July 1, 2014, in order to defray collection costs . . . charge to
the borrower an amount not to exceed 16 percent of the
outstanding principal and interest at the time of the loan sale.”
20 U.S.C. § 1078-6(a)(1)(D)(i).

B.

The challenged Rule precludes guarantors from levying
collection costs against defaulting borrowers who enter a
repayment plan or rehabilitation agreement during the initial
default period, i.e., within 60 days after default. 34 C.F.R.
§ 682.410(b)(2)(i).
 6
The Rule arose from the Seventh Circuit’s decision in
Bible v. United Student Aid Funds, Inc., 799 F.3d 633 (7th Cir.
2015). There, a defaulting Program borrower entered into a
rehabilitation agreement within the initial default period,
completed the required payments, and exited default; yet the
agency charged her hefty collection costs. Id. at 638, 645. The
borrower sued the guarantor for breach of contract, arguing that
the assessment of costs was prohibited by 34 C.F.R.
§ 682.410(b)(5)(ii)(D), which at the time said that “[t]he
guaranty agency, after it pays a default claim on a loan but
before it . . . assesses collection costs against a borrower, shall
. . . provide the borrower with . . . [a]n opportunity to enter into
a repayment agreement on terms satisfactory to the agency.”
Bible, 799 F.3d at 645–47 (emphasis in original) (quoting 34
C.F.R. § 682.410(b)(5)(ii)(D) (2015)).

The Department was not a party to the case but submitted
an amicus brief opining that guaranty agencies could not
charge collection costs when a borrower promptly enters a
repayment plan or rehabilitation agreement. Bible, 799 F.3d at
639. The Department had taken the same position before the
Seventh Circuit several years earlier. See id. at 651. Although
the Department had not previously issued guidance with this
interpretation, it had taken the position that a guaranty agency
“is not required to assess the borrower collection costs” when
the borrower “enter[s] into a satisfactory repayment
agreement” in the initial default period. J.A. 142 (Department
Letter to Guaranty Agency). The Seventh Circuit ruled in favor
of the borrower, agreeing with the Department’s interpretation.
Bible, 799 F.3d at 645. But Judge Flaum noted in a concurring
opinion that “perhaps the Department might consider
reexamining and revising the language of the regulations” to
eliminate all ambiguity. Id. at 663 (Flaum, J., concurring).
 7
In July 2015, the Department followed Judge Flaum’s
advice. It issued a “Dear Colleague” letter that interpreted the
existing statutes and regulations regarding collection costs as
prohibiting guaranty agencies from charging collection costs to
borrowers who enter a repayment plan or rehabilitation
agreement during the initial default period. See J.A. 143–48.
Then, in 2017, the Department withdrew that letter and began
a negotiated rulemaking. See J.A. 149–50; Student Assistance
General Provisions, Federal Perkins Loan Program, Federal
Family Education Loan Program, and William D. Ford Federal
Direct Loan Program, 83 Fed. Reg. 37,242, 37,247–50, 37,282,
37,324 (July 31, 2018). After receiving public comments,
including from Ascendium, the Department promulgated the
challenged Rule. 84 Fed. Reg. at 49,926. The Rule states:

Whether or not provided for in the borrower’s
promissory note and subject to any limitation on
the amount of those costs in that note, the
guaranty agency may charge a borrower an
amount equal to the reasonable costs incurred
by the agency in collecting a loan on which the
agency has paid a default or bankruptcy claim
unless, within the 60-day period after the
guaranty agency sends the initial notice
described in paragraph (b)(6)(ii) of this section,
the borrower enters into an acceptable
repayment agreement, including a rehabilitation
agreement, and honors that agreement, in which
case the guaranty agency must not charge a
borrower any collection costs.

Id.; 34 C.F.R. § 682.410(b)(2)(i).
 8
C.

Ascendium sued the Department in the district court,
alleging that the Rule violates the APA because it exceeds the
Department’s statutory authority by conflicting with the Act’s
directives and is arbitrary, capricious, or otherwise not in
accordance with law. The Department moved to dismiss the
complaint. It argued that Ascendium lacked standing to
challenge the part of the Rule relating to collection costs for
repayment agreements, as opposed to rehabilitation
agreements, and that Ascendium did not adequately allege that
the Rule was arbitrary, capricious, or contrary to law. A month
later, Ascendium moved for summary judgment on the merits.

The district court decided the motions at the same time,
granting both in part. See Ascendium Educ. Sols., Inc. v.
Cardona, 588 F. Supp. 3d 7, 10 (D.D.C. 2022). The court
determined that Ascendium lacked standing to challenge the
Rule as it applied to borrowers who entered repayment
agreements because Ascendium never charged collection costs
to such borrowers and had no plans to do so. Id. at 15–16.
Next, the court concluded that the Rule, as applied to borrowers
who enter rehabilitation agreements, exceeded the
Department’s authority under the Act. Id. at 21–22. Under the
district court’s reasoning, the Act permits guaranty agencies to
charge collection costs to borrowers whenever the agencies
engage in collection activities, including during the initial
default period. Id. at 17–22. The court determined, however,
that the Rule is not otherwise arbitrary, capricious, or contrary
to law. Id. at 22. Accordingly, the district court vacated the
Rule with respect to borrowers who enter rehabilitation
agreements but left it in place with respect to borrowers who
enter repayment plans. That decision satisfied neither party.
The Department timely appealed, and Ascendium timely cross-
appealed.
 9
II.

Both parties contend that the district court erred. The
Department argues that it had authority to promulgate the Rule;
Ascendium asserts that it has standing to challenge the Rule as
it applies to all borrowers, and that the Rule is arbitrary and
capricious.

On de novo review, we reverse the district court’s decision
in part. See Rempfer v. Sharfstein, 583 F.3d 860, 864–65 (D.C.
Cir. 2009). As an initial matter, we find that Ascendium has
standing to challenge the Rule as applied to borrowers who
enter repayment and rehabilitation agreements. We further
conclude that the Department had authority to promulgate the
Rule. The Act permits guarantors to charge borrowers only for
“reasonable collection costs,” 20 U.S.C. § 1091a(b)(1), and the
Department permissibly implemented that directive by
ensuring that borrowers who create little or no collections work
for a guarantor are not charged thousands of dollars in fees.
Ascendium’s position — that the Act always permits it to
recoup collection costs from borrowers — conflicts with the
statute’s clear, overarching directive that guarantors may
collect only “reasonable” fees. Furthermore, we agree with the
district court that the Rule is not arbitrary, capricious, or
otherwise contrary to law.

A.

We begin, as we must, with Ascendium’s standing. The
Department contends that Ascendium is not injured by the Rule
to the extent that it restricts collection costs for borrowers who
enter “repayment agreement[s],” as opposed to “rehabilitation
agreement[s],” during the initial default period. 34 C.F.R.
§ 682.410(b)(2)(i). Ascendium has never charged costs to
borrowers who enter repayment agreements and offered no
evidence of any plan to do so. Thus, in the Department’s view,
 10
Ascendium lacks standing to challenge the part of the Rule that
applies to that category of borrowers.

To have standing, Ascendium must have suffered an injury
in fact that is fairly traceable to the Department’s challenged
conduct; and a decision granting the relief that Ascendium
requests must be likely to redress its injury. Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560–61 (1992). Standing is required
“for each claim [Ascendium] seeks to press and for each form
of relief that is sought.” Davis v. FEC, 554 U.S. 724, 734
(2008) (cleaned up); accord Finnbin, LLC v. Consumer Prod.
Safety Comm’n, 45 F.4th 127, 136 (D.C. Cir. 2022). “[F]or
purposes of determining standing, we must assume that
petitioners will prevail on the merits of their argument.” See
NRDC v. Wheeler, 955 F.3d 68, 77 (D.C. Cir. 2020).

Ascendium has standing to pursue its claims. The Rule
injures Ascendium by depriving it of collection costs that it
previously charged (and planned to continue charging) to
borrowers who entered rehabilitation agreements during the
initial default period. See Czyzewski v. Jevic Holding Corp.,
580 U.S. 451, 464 (2017) (“For standing purposes, a loss of
even a small amount of money is ordinarily an injury.” (cleaned
up)). Further, Ascendium alleges that the rule is unlawful in
its entirety either because it was enacted without statutory
authority or because it is arbitrary and capricious. A ruling for
Ascendium would thus result in vacatur of the Rule. And if the
Rule were vacated for either reason, Ascendium’s injury would
be redressed: It could once again charge collection costs to
borrowers who enter rehabilitation plans. Ascendium thus has
standing to bring any claims that could lead to the Rule’s
vacatur, like the ones it raises here. See Mozilla Corp. v. FCC,
940 F.3d 1, 46–47 (D.C. Cir. 2019) (“When a party alleges
concrete injury from promulgation of an agency rule, it has
standing to challenge essential components of that rule . . .
 11
even if they are not directly linked to Petitioners’ injuries; if
Petitioners’ objections carry the day, the rule will be struck
down and their injury redressed.”); Catholic Soc. Servs. v.
Shalala, 12 F.3d 1123, 1124–25 (D.C. Cir. 1994) (determining
that plaintiffs had Article III standing to challenge entire rule
because, even though they were injured only by its prospective
effects, they had argued and alleged that its retroactive impacts
rendered the entire rule invalid).2

B.

1.

On the merits, Ascendium argues that the Department
acted “in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right,” 5 U.S.C. § 706(2)(C),
when it promulgated the Rule. Ascendium asserts that the Rule
is inconsistent with the Act because it limits guarantors’ ability
to charge collection fees to defaulted borrowers. In
Ascendium’s view, the Act unconditionally authorizes such
fees when a borrower defaults.

To determine whether the Department acted within the
bounds of its statutory authority, we begin with the traditional

2
Ascendium makes an alternative argument that it is directly
injured by the Rule as it applies to borrowers who enter repayment
plans during the initial default period because the Rule eliminates
Ascendium’s right to charge fees to those borrowers. Although
Ascendium has never said that it intends to charge collection costs to
borrowers with repayment agreements, it insists that it should have
the right to do so, presumably in case it later changes its mind.
Ascendium’s “some day” intentions are insufficient to establish
standing. Lujan, 504 U.S. at 564; cf. Sabre, Inc. v. DOT, 429 F.3d
1113, 1118–19 (D.C. Cir. 2005) (determining that target of a
promulgated rule had standing because it had concrete plans to
engage in activities the rule prohibited).
 12
tools of statutory interpretation: text, context, structure, and
purpose. See Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896,
1904, 1906 (2022); Lindeen v. SEC, 825 F.3d 646, 653 (D.C.
Cir. 2016).

“The starting point for our interpretation of a statute is
always its language.” Lindeen, 825 F.3d at 653 (cleaned up).
Here, the text of the Act mandates that borrowers who default
on their loans “shall be required to pay . . . reasonable
collection costs.” 20 U.S.C. § 1091a(b)(1) (emphasis added).
In other words, guarantors may recoup the costs of collecting
loans from borrowers only when such costs are reasonable. But
the Act does not define which costs are “reasonable.” See
Bible, 799 F.3d at 641, 650 (citing Black v. Educ. Credit Mgmt.
Corp., 459 F.3d 796, 799 (7th Cir. 2006)). The plain text of
the Act therefore does not provide concrete guidance about
which collection costs must be charged to defaulting
borrowers. See Reasonable, Black’s Law Dictionary (11th ed.
2019) (defining “reasonable” broadly as “[f]air, proper, or
moderate under the circumstances; sensible” or “[a]ccording to
reason”); Reasonable, Oxford English Dictionary (2d ed.
1989) (providing similar definition of “reasonable”); cf. Nat’l
Recycling Coal., Inc. v. Reilly, 884 F.2d 1431, 1435 (D.C. Cir.
1989) (“As the word ‘unreasonable’ is inherently subjective,
the language . . . provides little guidance as to Congress’
specific intent.”).

The statutory context and structure do not provide any
additional clarity on the meaning of “reasonable collection
costs”; instead, they demonstrate that Congress intended for
the Department to determine which costs fit that criterion.
Importantly, in 20 U.S.C. § 1082(a)(1), Congress empowered
the Department to “prescribe such regulations as may be
necessary to carry out the purposes” of the Act. Id.
§ 1082(a)(1). The Act thus “explicitly le[aves] a gap”
 13
regarding the meaning of “reasonable” collection costs, and it
grants the Department the authority to fill that gap, so long as
the Department’s interpretation itself is reasonable. Chevron
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843
(1984); Black, 459 F.3d at 799 (“Congress left it up to the
Secretary to interpret that term [(‘reasonable collection costs’)]
through regulations.”); cf. Solar Energy Indus. Ass’n v. FERC,
59 F.4th 1287, 1298 (D.C. Cir. 2023) (Walker, J., concurring
in part and dissenting in part) (noting that where Congress
leaves a gap for an agency to fill, like determining what level
of pollutants is “unreasonable,” “courts should not second
guess the agency’s decision” (cleaned up)).

Ascendium reads the Act differently. It contends that the
Act unambiguously and without exception permits guarantors
to charge borrowers collection costs when they default. Thus,
Ascendium contends, there is no room for the Department to
impose any limits on the recovery of collection costs. In
support of its position, Ascendium relies on 20 U.S.C.
§ 1091a(b)(1) and § 1078-6(a)(1)(D)(i)(II)(aa). But it
misconstrues both of those provisions.

Ascendium says that 20 U.S.C. § 1091a(b)(1)’s direction
that defaulting borrowers “shall” pay “collection costs”
triggers an absolute right for Ascendium to charge such costs
to borrowers whenever they default. Id. § 1091a(b)(1). Yet
that argument ignores the explicit caveat that the assessed costs
must be “reasonable.” Id. (“[A] borrower who has defaulted
on a loan made under this subchapter shall be required to pay,
in addition to other charges specified in this subchapter
reasonable collection costs.”). “It is a familiar canon of
statutory construction that, if possible, we are to construe a
statute so as to give effect to every clause and word.” Air
Transp. Ass’n of Am., Inc. v. Dep’t of Agric., 37 F.4th 667, 672
(D.C. Cir. 2022) (cleaned up); accord Williams v. Taylor, 529
 14
U.S. 362, 404 (2000); see also Antonin Scalia & Bryan Garner,
Reading Law: The Interpretation of Legal Texts 174 (2012)
(describing canon against surplusage). Ascendium’s
construction of § 1091a(b)(1) reads the word “reasonable” out
of the statute.

Ascendium also argues that 20 U.S.C. § 1078-
6(a)(1)(D)(i)(II)(aa) gives it an unconditional right to charge
borrowers a 16-percent fee when borrowers complete their
rehabilitation plans. See id. § 1078-6(a)(1)(D)(i)(II)(aa) (A
guarantor “may . . . in order to defray collection costs . . .
charge to the borrower an amount not to exceed 16 percent of
the outstanding principal and interest at the time of the loan
sale.”). As Ascendium admits, however, reading § 1078-6 to
mandate an unconditional 16-percent fee requires disregarding
the language that guaranty agencies “may” charge that amount
“in order to defray collection costs.” Id. (emphasis added).
The most natural reading of the statute is that it permits a
guaranty agency to charge fees to borrowers only to offset
collection costs, and it caps such costs at 16 percent of the
loan’s outstanding balance. See Bible, 799 F.3d at 645 n.4
(describing the 16-percent fee as a “cap” on collection costs);
id. at 667 (Manion, J., concurring in part and dissenting in part)
(noting that § 1078-6 and associated regulation “limits
collection costs to 18.5% (now 16%)”).

Ascendium posits that “in order to defray collection costs”
is merely a “preamble” or “prefatory clause,” and so does not
change the plain meaning of the “operative clause” allowing an
unconditional 16-percent fee. Ascendium Br. 39–42. Yet that
reading too would give no effect to several words in the statute
— like “may” and “in order to defray costs,” 20 U.S.C. § 1078-
6(a)(1)(D)(i)(II) — without any basis for doing so in the
statutory text or structure. See Air Transp. Ass’n, 37 F.4th at
 15
672 (“[We] are to construe a statute so as to give effect to every
clause and word.” (cleaned up)).

Ascendium’s reading of 20 U.S.C. § 1078-6 also assumes
that the collection costs charged to borrowers who rehabilitate
their loans, subject to the 16-percent cap, are exempt from
§ 1091a’s general requirement that defaulting borrowers must
pay “reasonable collection costs.” Statutes, however, “must be
read as a whole.” United States v. Atl. Rsch. Corp., 551 U.S.
128, 135 (2007) (cleaned up); accord Ross v. SEC, 34 F.4th
1114, 1119 (D.C. Cir. 2022). Ascendium does not point to any
part of the statutory text that, explicitly or implicitly, exempts
charges under § 1078-6 from § 1091a’s reasonableness
requirement. And so, any collection costs charged to
borrowers under § 1078-6 must also be “reasonable.” 3

Taking a different tack, Ascendium argues that the Rule is
inconsistent with the Act’s definition of “collection costs.”
According to Ascendium, the Act defines “collection costs” as

3
The statutory history also demonstrates that Congress intended
the 16-percent figure to act as a cap, and not as a guaranteed fee.
Congress did not alter the language requiring collection costs to be
“reasonable” when it first established the rehabilitation program. An
Act to reauthorize and revise the Higher Education Act of 1965, and
for other purposes, Pub. L. No. 99-498, § 402(a), 428F, 100 Stat.
1268, 1394–95 (1986) (establishing pilot rehabilitation program).
Congress also added the 16-percent provision only after the
Department issued guidance to stop guaranty agencies from charging
fees on rehabilitated loans that were “not reasonable” (in some cases
the fees charged equaled 43 percent of the loan balance). See J.A.
139–140 (1994 Dear Guaranty Agency Letter); H.R. Rep. No. 109-
276, at 240 (2005) (explaining that bill to amend the Higher
Education Act “[f]urther amends section 428F(a) by inserting a new
subparagraph (C) of paragraph (1) to codify the collection costs
permissible for rehabilitated loans at up to 18.5 percent of the
outstanding principal and interest of the loan”).
 16
any costs resulting from “collection activities.” See
Ascendium Br. 48–50 (contending that the Act defines “default
collection activities” as “activities of a [guarantor] that are
directly related to the collection of the loan on which a default
claim has been paid to the participating lender” (alteration in
original) (quoting 20 U.S.C. § 1072b(d)(3)(A))). Based on
Ascendium’s reading of the statute, “collection activities”
include any action taken in support of recovering a defaulted
loan, and guaranty agencies must be able to recover the costs
for all such activities. But even if we assume, arguendo, that
the Act unambiguously defines “collection activities” and
collection costs as Ascendium contends, those costs must still
be “reasonable” under § 1091a(b)(1). And, as addressed, the
Act grants the Secretary authority to determine which costs
may “reasonabl[y]” be charged. See id. § 1091a(b)(1).
Ascendium therefore finds no support in the statutory provision
that it cites.

In any event, we disagree with Ascendium’s claims that
the Act unambiguously defines “collection costs” as costs for
“collection activities,” and that those terms encompass all steps
taken to recover a loan. The provision cited by Ascendium is
expressly limited to a subsection setting forth how guaranty
agencies must structure their “Operating Funds,” and does not
address how guarantors may interact with borrowers. See 20
U.S.C. § 1072b(d)(3) (defining “default collection activities”
“[f]or [the] purposes of [the] subsection”). The Act recognizes
a distinction between “collection” and “administrative” costs,
and we agree with the Department that the costs incurred by
guarantors during the initial default period are largely
“administrative.” See 20 U.S.C. §§ 1080(b) (referring to
“reasonable administrative costs and collection costs”),
1082(l)(1), (2) (requiring the Secretary to develop regulations
that are “designed to minimize administrative costs”); see also
34 C.F.R. § 682.410(b)(6)(ii) (requiring guarantor to, in the
 17
initial default period, “notify the borrower . . . that if he or she
does not make repayment arrangements acceptable to the
agency, the agency will promptly initiate procedures to collect
the debt” (emphasis added)). Other parts of the Act explicitly
connect “collection costs” with activities guarantors may
engage in only after the initial default period, like litigation;
they suggest that the initial outreach that agencies engage in to
communicate with borrowers who first enter default fall into a
separate category. See 20 U.S.C. § 1087cc(a)(3)(D) (“An
agreement with any institution of higher education for the
payment of Federal capital contributions under this part shall
. . . provide that such student loan fund shall be used only for
. . . costs of litigation, and other collection costs agreed to by
the Secretary.”). Thus, we decline to adopt Ascendium’s
expansive view of “collection costs.”

2.

Because the Act requires all “collection costs” charged to
borrowers to be “reasonable,” we turn to whether the Rule
reflects a permissible interpretation of “reasonable collection
costs.” 20 U.S.C. § 1091a(b)(1). Accordingly, “we consider
whether the interpretation is ‘arbitrary or capricious in
substance, or manifestly contrary to the statute.’” Good
Fortune Shipping SA v. Comm’r, 897 F.3d 256, 261 (D.C. Cir.
2018) (quoting Mayo Found. for Med. Educ. & Rsch. v. United
States, 562 U.S. 44, 53 (2011)). “[We] ask whether the
[Department] has reasonably explained how the permissible
interpretation it chose is ‘rationally related to the goals of’ the
statute.” Vill. of Barrington v. Surface Transp. Bd., 636 F.3d
650, 665 (D.C. Cir. 2011) (quoting AT&T Corp. v. Iowa
Utilities Bd., 525 U.S. 366, 388 (1999)).

As noted, the ordinary meaning of “reasonable” is “[f]air,
proper, or moderate under the circumstances; sensible” or
 18
“[according] to reason.” Reasonable, Black’s Law Dictionary,
supra; Van Hollen v. FEC, 811 F.3d 486, 492 (D.C. Cir. 2016)
(explaining that the starting point for determining whether an
agency interpretation of a statute is permissible is the text). We
naturally also must evaluate the reasonableness of the costs in
question based on the statutory context. See Ross, 34 F.4th at
1119 (“[T]he meaning of statutory language, plain or not,
depends on context.” (cleaned up)); cf. US Airways, Inc. v.
Barnett, 535 U.S. 391, 399–402 (2002) (looking to statutory
context and ordinary use to define term “reasonable
accommodation”).

Here, the Rule prohibits a guarantor from charging
collection costs to a borrower who enters a repayment plan or
a rehabilitation agreement during the initial default period: It
implicitly deems such costs “unreasonable” under the
circumstances. See 34 C.F.R. § 682.410(b)(2)(i). The
borrowers in question either exit default or begin to exit default
within 60 days, and guarantors therefore expend only minimal
effort and expense to recover their loans. See supra Section
I.A. Indeed, a guarantor’s activities during the initial default
period are primarily administrative, like issuing certain
notifications to the borrower. See id. But collection costs
generally are calculated either under the average-cost system,
see 34 C.F.R. § 30.60, or as a percentage of a borrower’s
outstanding loans and interest, see 20 U.S.C. § 1078-
6(a)(1)(D)(i) — two formulas that typically yield thousands of
dollars in charges. In this statutory context, it would not be
“reasonable” — i.e., “[f]air, proper, or moderate” — to require
borrowers to pay thousands of dollars to guarantors that did
little more than send out a few notifications. Reasonable,
Black’s Law Dictionary, supra. As the Department explained
in promulgating the final Rule, “[it] is not reasonable for the
guaranty agency to charge collection costs for collection
activities it does not need to take.” 84 Fed. Reg. at 49,877; see
 19
also id. (noting that Rule is consistent with policy articulated
in 2015 Letter); J.A. 146 (2015 Letter) (recognizing that
borrowers in “different stages of delinquency” create different
types of costs). We conclude that the Rule is consistent with
the Act’s requirement that “reasonable” collection costs must
be passed on to borrowers.4

The Rule is also consistent with the purpose of the Act’s
provision regarding the payment of “reasonable” collection
costs. See Am. Hosp. Ass’n v. Azar, 964 F.3d 1230, 1245 (D.C.
Cir. 2020) (finding agency interpretation reasonable where it
“fit[] the design of the statute as a whole and its object and
policy” (cleaned up)). Congress enacted the reasonable-costs
provision “[o]ut of concern for the significant financial
problems that defaulted student loans pose for the fisc,” and to
move the burden of collections costs from taxpayers to the
defaulting borrower. Black, 459 F.3d at 799. The Rule
recognizes that borrowers who enter repayment or
rehabilitation agreements within 60 days of defaulting do not
create “significant financial problems . . . for the fisc,” id., and
it provides an incentive for defaulting borrowers to promptly
exit default by allowing them to thereby avoid paying
collection costs. See 83 Fed. Reg. at 37,282 (“[To] encourage
borrowers to enter into satisfactory repayment plans, the
Department proposes that guaranty agencies may not assess

4
As Ascendium argues, borrowers who enter into repayment or
rehabilitation agreements one day after the initial default period may
be charged significant costs, without any requirement that guaranty
agencies engage in significant collections activities. See Ascendium
Br. 59–62. But that result is compelled by the Act and its average-
cost regulations, which Ascendium does not challenge here. See
Black, 459 F.3d at 800–01 (upholding average cost scheme). The
charges passed on under those circumstances do not make the Rule
inconsistent with the Act or otherwise unreasonable.
 20
collection costs to a borrower who enters into an acceptable
repayment agreement, including a rehabilitation agreement,
and honors that agreement, within 60 days of receiving notice
of default.”); 84 Fed. Reg. at 49,877 (“It is not reasonable for
the guaranty agency to charge collection costs for collection
activities it does not need to take because the borrower entered
into and met the requirements of a loan rehabilitation
agreement.”).

Ascendium counters that the Rule does not actually define
“reasonable collection costs.” It points to the fact that the Rule
did not disturb the regulation defining collection costs,
34 C.F.R. § 682.410(b)(2)(iii), which in turn incorporates by
reference 34 C.F.R. § 30.60, a provision that broadly describes
administrative costs as “costs associated with the collection of
a particular debt.”

Ascendium’s contention that the Rule is not an
interpretation of “reasonable collection costs” is not supported
by the record. The Department explicitly invoked the statutes
requiring “reasonable” costs — 20 U.S.C. § 1078-6 and
§ 1091a — in promulgating the Rule. See 84 Fed. Reg. at
49,926. It also explained that a guaranty agency “must not
charge a borrower any collection costs,” 34 C.F.R.
§ 682.410(b)(2)(i), if a borrower enters a repayment or
rehabilitation agreement in the initial default period because
those costs are “not reasonable.” 84 Fed. Reg. at 49,877 (“[It]
is not reasonable for the guaranty agency to charge collection
costs for collection activities it does not need to take . . . .”).
Nor is the provision cited by Ascendium — 34 C.F.R.
§ 682.410(b)(2)(iii) — inconsistent with the Rule’s definition
of reasonable collection costs. That subsection does not
include in its definition of collection costs the type of
administrative costs that guaranty agencies incur during the
first 60 days after a default. See id. Rather, it lists costs like
 21
“attorney’s fees, collection agency charges, and court costs,”
which guaranty agencies cannot incur until after the initial
default period. Id. The subsection’s reference to 34 C.F.R.
§ 30.60 also does not define collection costs as any costs
associated with collecting debt but instead incorporates a cap
on collection costs. See id. § 682.410(b)(2)(iii) (“[The] amount
charged a borrower must equal the lesser of . . . [t]he amount
the same borrower would be charged for the cost of collection
under the formula in 34 C.F.R. [§] 30.60” (emphasis added)).
In fact, § 682.410 as a whole was reasonably interpreted in
Bible to allow a limitation on charging costs that are incurred
during the initial default period to borrowers, even before the
challenged Rule was enacted. See Bible, 799 F.3d at 650–51.

In sum, the Rule is consistent with the Act’s text, structure,
and purpose, and the Department acted well within its
congressionally delegated authority by promulgating it.

C.

Ascendium further contends that the Rule is arbitrary and
capricious. “The scope of review under the ‘arbitrary and
capricious’ standard is narrow and a court is not to substitute
its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n
of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983). “We will uphold the agency’s action if the agency . . .
articulated a satisfactory explanation for its action including a
rational connection between the facts found and the choice
made.” Am. Clinical Lab’y Ass’n v. Becerra, 40 F.4th 616, 624
(D.C. Cir. 2022) (cleaned up).

Ascendium asserts that the Rule is arbitrary and capricious
because the Department failed to provide a sufficient response
to its comment during the rulemaking process that “there is no
reasonable basis for separating the availability of fees from the
activities guarantors perform.” Ascendium Br. 68. According
 22
to Ascendium, guaranty agencies that encourage the early entry
of rehabilitation plans provide superior services to borrowers
and further the goals of the Act. Thus, Ascendium argues, it is
“perverse” that such guarantors cannot collect fees when they
successfully persuade borrowers to enter rehabilitation plans
within the initial default period. Id. at 71. The Department,
however, provided a reasoned response to that comment: It
explained that “[c]ollection costs are not intended to be a
funding source for guaranty agencies or an incentive for them
to offer a statutorily required opportunity to borrowers.” 84
Fed. Reg. at 49,877.

As recognized by the Department, the Act requires
guaranty agencies to maintain a rehabilitation program, see 20
U.S.C. § 1078-6; and a regulation instructs guarantors to
inform borrowers of that program during the initial default
period, when the first notice of default is issued, see 34 C.F.R.
§ 682.410(b)(5)(vi)(M). Although guaranty agencies generally
are permitted to recoup reasonable collection costs from
borrowers, the agencies are nonprofit organizations that
operate in the context of a program intended to “assist” student
borrowers. 20 U.S.C. §§ 1085(j), 1070(a). The Department’s
response to Ascendium’s comment adequately refuted
Ascendium’s assumption that the purpose of the Rule should
be to incentivize guarantors to enter rehabilitation agreements
by allowing them to charge collection costs. As required, the
Department generally “articulated a satisfactory explanation
for its action.” Am. Clinical Lab’y Ass’n, 40 F.4th at 624
(cleaned up).

* * *

For the reasons stated, we affirm in part and reverse in
part. We hold that Ascendium has standing to challenge the
entirety of the Rule; that the Department did not exceed its
 23
statutory authority in promulgating the Rule; and that the Rule
is not arbitrary or capricious. We thus uphold the Rule in its
entirety.

So ordered.
WALKER, Circuit Judge, concurring:

Congress empowered the Department of Education to
impose “reasonable collection costs” on certain debtors who
default on their student loans. 20 U.S.C. § 1091a(b)(1).
Relying on that phrase, the Department promulgated a rule
prohibiting guarantors from recovering “collection costs”
within 60 days of those defaults if the debtors have taken
certain steps. 34 C.F.R. § 682.410(b)(2). I agree with the
Court that the Department acted lawfully, and I join the Court’s
opinion in full.

I write separately to emphasize that the deference we owe
to the Department’s choice does not depend on Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837 (1984). With or without Chevron, the term
“reasonable” itself “confers broad discretion.” Beal v. Doe,
432 U.S. 438, 444 (1977); see also Williams Natural Gas Co.
v. FERC, 943 F.2d 1320, 1331 (D.C. Cir. 1991). So if Congress
expressly (and constitutionally) empowers an agency to make
a “reasonable” regulatory choice, the validity of the agency’s
action depends on no more and no less than whether the agency
acted reasonably and explained itself reasonably.

Here, the Department of Education did so — and we don’t
need Chevron to tell us that. 1

1
Cf. 5 U.S.C. § 706 (“The reviewing court shall . . . hold unlawful
and set aside agency action . . . found to be . . . arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with
law . . . .”); FCC v. Prometheus Radio Project, 141 S. Ct. 1150, 1158
(2021) (“The APA’s arbitrary-and-capricious standard requires that
agency action be reasonable and reasonably explained.”); Brett M.
Kavanaugh, Fixing Statutory Interpretation, 129 Harv. L. Rev. 2118,
2153–54 (2016) (Courts should “defer to agencies involving statutes
using broad and open-ended terms like ‘reasonable,’ ‘appropriate,’
‘feasible,’ or ‘practicable.’ In those cases, courts should say that the
agency may choose among reasonable options allowed by the text of
the statute. In those circumstances, courts should be careful not to
unduly second-guess the agency’s choice of regulation. Courts
should defer to the agency, just as they do when conducting
deferential arbitrary and capricious review under the related reasoned
decisionmaking principle of State Farm.”) (citing Motor Vehicle
Manufacturers Association of United States, Inc. v. State Farm
Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983)) (other
citations omitted).