In the Seventh Circuit, which includes Illinois, Indiana and Wisconsin – the answer is “YES” in a ground breaking ruling against Great Lakes this week. Servicers must tell the truth when a student loan borrower asks questions about their options to repay student loans. Servicers who steer borrowers into plans that benefit lenders,forcing borrowers struggling to keep up with their loans, can be held liable. Halleluja!! (yes, I had to look up how to spell that 🙂
In Florida, we still don’t know. We have a pending class action on appeal with our co-counsel against the very same defendant, Great Lakes, making the same arguments in the context of the Public Service Loan Forgiveness program.
This borrower, Nicole Nelson, says she was never informed about income-based repayment plans, which federal law requires loan servicers to offer. Income-based plans set monthly loan payments as a percentage of a borrower’s discretionary income, but, according to Nelson, these plans are less lucrative for lenders and the enrollment process is time-consuming for the loan servicer. Instead, the servicer pushed forbearance. We tell clients that forbearances are the drug of choice for servicers because it is easy to grant, and runs the loan balance up. Forbearances do have their place, but they should be considered as a bandaid for a temporary reprieve, not a long-term solution.