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Nelson v. Great Lakes

On June 27, 2019, the 7th Circuit Court of Appeals ruled that student loan servicers can be held accountable under state consumer protection laws. The decision in Nelson v. Great Lakes will have a major impact on the future of student borrower protections and the extent to which the Trump administration can insulate servicers from effective oversight.

“This decision is a victory for student loan borrowers and a powerful rebuke to the attempts by Betsy DeVos to shield student loan servicers from oversight,” said Student Defense Vice President and Chief Counsel Dan Zibel, who argued the case before the 7th Circuit. “Although Secretary DeVos has ignored rampant servicing misconduct and tried to bar the use of state consumer protection law against servicers, this ruling ensures that the courtroom doors will remain open to student loan borrowers and state attorneys general fighting on their behalf.”

Following the Court's decision, Dan co-authored an Op-Ed with former Illinois Attorney General Lisa Madigan, available here.


In this case, a student loan borrower sued the servicer of her federal student loans, Great Lakes Education Loan Services. The borrower claimed that Great Lakes advertised itself as an expert advisor offering to provide individualized advice in each borrower’s best interest, but instead systematically steered borrowers into repayment plans that were in the financial interest of Great Lakes and to the detriment of the borrowers.  Great Lakes asserted that student loan borrowers do not have the right to use state consumer protection law to remedy these misrepresentations. The position asserted by Great Lakes got support from Secretary of Education Betsy DeVos, who has attempted to insulate the loan servicers from state oversight and enforcement. In March of 2018, the Department issued a Notice of Interpretation arguing that state regulation of federal student loan servicers is preempted by federal law.  In asserting its position regarding the preemption of state consumer protection laws, the Department of Education has relied heavily on the decision under appeal in this case. The Opinion by the 7th Circuit noted that the Department’s interpretation was “not persuasive” because it was “not particularly thorough.” 

Many states have enacted consumer laws that give student borrowers additional protection from the servicers of federal student loans. Laws and supervision at the state level can hold servicers accountable when they give borrowers the runaround by providing inaccurate or misleading information, or otherwise treating borrowers unfairly. Private companies, such as Navient and Nelnet (now the parent of Great Lakes), service and collect more than $1.5 trillion in outstanding loans from over 44 million borrowers across the nation.  The Department of Education’s position – and the position advocated for by Great Lakes in this case – has been opposed by a bipartisan coalition of 25 state attorneys general, the National Governors Association (a bipartisan organization representing the collective voice of all 50 state governors), and consumer advocates such as NSLDN.

Student Defense became involved in this litigation after an appeal was filed, to provide expert legal advice and strategy on issues of preemption. On October 23, 2018, Student Defense Vice President and Chief Counsel Dan Zibel presented oral arguments before the U.S. Court of Appeals for the 7th Circuit.