Court rules student loan companies are subject to state consumer laws, contrary to Trump administration’s stance – The Mercury News
A federal appeals court ruling Thursday could stymie the Education Department’s efforts to shield from state regulation companies that manage the department’s $1.5 trillion portfolio of student loans.
The 24-page opinion from the U.S. Court of Appeals for the 7th Circuit challenges a decision in October barring Nicole Nelson from suing Great Lakes Educational Loan Services, the company servicing her federal student loans, for allegedly violating Illinois’ consumer fraud laws. Nelson alleges Great Lakes touted its expertise as a student loan adviser, yet steered her into an expensive repayment option.
Nelnet, another student loan servicer that recently acquired Great Lakes, declined to comment on the lawsuit.
A lower court in the Southern District of Illinois had granted Great Lakes’ motion to dismiss the case on the grounds that Nelson’s claims were preempted by federal law. The Higher Education Act says federal loans are not subject to state disclosure requirements, and the court reasoned that Great Lakes was accused only of failing to disclose certain information. But the appellate court took issue with that rationale.