Two recent decisions against student loan servicers were issued on similar grounds, and therefore the Third Circuit Court of Appeals cited to both cases in its ruling.

Late last year, the 7th Circuit Court of Appeals issued a landmark decision in Nelson v. Great Lakes . The court held that claims against federal student loan servicers under state law for misrepresentations of federal loan programs aren’t necessarily pre-empted by federal law. In other words, student loan borrowers could sue their servicers under state law and, potentially, prevail.

And another decision from the 11th Circuit affirmed this central ruling. In Lawson-Ross v. Great Lakes, borrowers sued Great Lakes education for creating misrepresentations to borrowers about the general public Service Loan Forgiveness (PSLF) program. the scholar loan borrowers alleged that Great Lakes made affirmative misrepresentations to them and other borrowers that they were on target to possess their student loans forgiven under PSLF, when actually their loans were ineligible. The 11th Circuit held that the upper Education Act doesn’t pre-empt the legal claims against Great Lakes for its affirmative misrepresentations about the borrowers’ eligibility for Public Service Loan Forgiveness (PSLF).

In the Pennsylvania case, the Third Circuit cited to those two decisions. ““We follow our sister Circuits in holding that although the preemption provision of the Education Act preempts claims supported failures to disclose information as needed by the statute, it doesn’t preempt claims supported affirmative misrepresentations.”

Student Loan debt crisis worsened after Navient thought that they could secure guaranteed repayment for their loans if they work as a lender, debt collection agency and loan servicer for any debts that are in default. As a result, they got their hands on all three of the roles in controlling the whole cycle of student debt. They were more interested in the loans that went into default so they could charge far more interest rates – as much as 15-25% compared to the loans that were still in repayment offering about only five to seven percent.

They were interested in giving loans to borrowers who had low credit scores and without the ability to repay the amount. Navient gave student loans to anybody who was willing to take it and ended up having over 12,000,000 customers across the United States and more than 300 BILLION dollars in private and federal student loans. The strategy worked very well for Navient; they reported a profit of over 250 million in 2017 – the same year they were hit with four massive lawsuits against them. It is not hard to imagine what they could accomplish if there were no Navient lawsuits.

Fortunately, the CFPB and some State Attorney Generals are all turning against Navient with massive lawsuits. The States Attorney Generals of Washington, Pennsylvania, and Illinois have all attacked Navient with three different lawsuits, while Consumer Financial Protection Bureau is suing the company with one lawsuit. Each of the Navient lawsuits is accusing the company of allegedly making student loan repayment process and the student loan servicing as expensive, confusing and painful as possible.

CFPB Lawsuit and Private and Federal Student Loans
The lawsuit brought by the CFPB does cover both Private and Federal student loans so that the lawsuits will help everybody regardless of the type of loans. The essential accusation from the Consumer Financial Protection Bureau’s lawsuit is establishing barriers to repayment by giving students misleading information, incorrectly processing the payments and failing to react when the students disagreed.