Madison - St. Clair Record

Wednesday, August 21, 2019

Student loan servicer says proposed class action 'piggybacked' on similar suits alleging borrowers were steered into costly repayment programs

By Heather Isringhausen Gvillo | May 31, 2017


A student loan servicer seeks to dismiss a proposed class action claiming financially stressed borrowers were steered into costly repayment programs, arguing that the suit “piggybacked” on two similar lawsuits against Navient.

Great Lakes Educational Loan Services filed a motion to dismiss and strike the complaint on April 24 through attorneys Abby Risner and John Drake of Greensfelder, Hemker & Gale PC in St. Louis.

The defendant argues that the complaint includes claims against a different company, Navient, and should be stricken “as they do not reflect a reasonable inquiry by Plaintiff into the factual basis of her allegations and are, therefore, immaterial and scandalous.”

In its memorandum in support of its motion, the defendant argues that the plaintiff “piggybacked” on two lawsuits against Navient, copying verbatim large sections of the factual allegations made in those cases against the student loan servicer rather than conducting investigation into the facts of her particular case.

“Plaintiff’s copy-cat lawsuit must be dismissed both because it lacks the required specific inquiry and, even if it satisfied the Federal Rules of Civil Procedure, it is preempted by federal law and fails to state a claim,” the memorandum states.

“The Complaint consists of nothing more than allegations cribbed from another lawsuit in an invalid attempt to impose additional, inconsistent state-law requirements on a highly-regulated federal contractor whose activities are dictated by federal law and oversight,” it continues.

Without the allegations, Great Lakes Educational argues that the complaint cannot stand and should be dismissed.

Judge Nancy Rosenstengel scheduled a motion hearing for the motion to dismiss and motion to strike for June 14 at 9:30 a.m.

On May 15, plaintiff Nicole Denise Nelson filed an amended complaint modifying a defendant party as Doe 1-10.

The suit alleges Great Lakes, based in Madison, Wisc., has encouraged financially strapped borrows into forbearance rather than more appropriate income-driven repayment loans, “which is more costly to the student loan borrower but significantly less costly for the student loan servicer.”

Pfe“In sum, counseling borrowers about alternative student loan payment plans and enrolling those student loan borrowers in income-driven repayment plans is costly for Defendants and its employees,” the suit states. “In contrast, enrollment of student loan borrowers in forbearance can often be completed over the phone, in a matter of minutes, and generally without the submission of any paperwork.”

Nelson claims she began making payments on her student loans in December 2009 but entered into forbearance by November 2012. Over the next few years, Nelson bounced in and out of forbearance, changed jobs and became unemployed, but when she discussed her situation over the phone with Great Lakes employees, she claims she was told her options were forbearance or a deferment.

“Plaintiff was not informed of alternative or income-driven repayment option,” the complaint states. “These other alternative or repayment options would have likely allowed Plaintiff a $0.0 or extremely low monthly payment, and would have counted as qualifying payments towards loan forgiveness. Instead, Plaintiff was, pursuant to Defendants’ policy and practice, steered into forbearance.”

The suit states that federal student loan borrowers who can’t make monthly payments on their student loan debt may opt for alternative repayment plans that can include a percentage of their discretionary income or that can count toward loan forgiveness programs.

“However, despite the wide-spread availability of income-driven repayment plans, and their clear benefits to student loan borrowers, student loan servicers, like Great Lakes, systematically deterred Plaintiff, and upon information and belief, potentially thousands of other borrowers from obtaining access to some or all of the benefits and protections associated with income driven repayment plans,” the suit states.

Nelson, 33, of Shiloh filed her suit on behalf of others and seeks in excess of $5 million in compensatory, exemplary and punitive damages.

Nelson is an attorney formerly employed at the Belleville office of the Illinois Attorney General. She is represented by Brandon Wise and Paul Lesko of Pfeiffer Rosca Wolf Abdullah Carr & Kane in St. Louis.

U.S. District Court for the Southern District of Illinois case number 3:17-cv-183

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U.S. District Court for the Southern District of Illinois