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Servicer Great Lakes Set To Evade CA Student Loan Protection Law

Friday, July 13, 2018
Graciela Aponte-Diaz

OAKLAND, CALIF. - Great Lakes Educational Loan Services, Inc., one of the country’s largest student loan servicers that was acquired by NelNet Inc. last February, has signaled to the California Department of Business Oversight (DBO) that it will not comply with that state’s Student Loan Servicing Act of 2016. The law requires that in order for a servicer to operate in the state, it must apply for state licenses. Great Lakes is claiming that it will follow the U.S. Department of Education's footsteps in seeking to thwart state authority to hold student loan servicers accountable. 

This move by Great Lakes is the latest in a long string of efforts by servicers and the federal government to weaken the oversight of companies handling billions of dollars of student loan debt. Since 2017, the Department of Education, under Secretary Betsy DeVos’ guidance, has aggressively fought to prohibit state law from regulating servicers and student loan debt collectors. The student loan industry has consistently lobbied the U.S. Department of Education to rollback state efforts from cracking down on their abusive practices. And the Department of Education seems to be acquiescing to their wishes.

In the last week, a May 30th letter from the Consumer Financial Protection Bureau to the General Counsel of the Department of Education appeared in court filings against Navient, the nation's largest student loan servicer. That letter demanded that the Department of Education authorize Navient to turn over student loan documents needed to pursue the case on behalf of student loan borrowers. So far, the Department has refused, effectively shielding Navient from state and federal law enforcement agencies.

In a notice in the Federal Register, the Department of Education signaled that they will continue to side with servicers over students, noticing that they will no longer disclose student loan records for the use of law enforcement agencies. Comments to the Federal Register, due today, already include opposition from a coalition of state attorneys general. 

States have long been outspoken about their authority in this area. Last fall, 26 state attorneys general wrote a letter to Secretary DeVos clarifying the rights of states to enforce their own laws, pointing to the narrow scope of the Higher Education Act and other federal statutes in the preemption of state laws concerning student loan servicing and debt collection.

Center for Responsible Lending (CRL) California Policy Director Graciela Aponte-Diaz released the following statement:

“Undermining state laws is a tactic that predatory lenders use. The student loan debt crisis is real, and it disproportionately impacts communities of color, especially in California. Millions of student loan borrowers across the country share the burden of a still-growing $1.4 trillion in student loan debt, which makes it difficult each year for borrowers to buy a house, start a business, and raise a family. The California State Legislature recognizes this issue which is why it passed the Student Loan Servicing Act--to protect the interest of students, not industry lobbyists.  Despite the efforts of the Department of Education and servicers to undermine them, states must continue use their authority to address unfair and abusive practices by student loan servicers."

For more information or to arrange an interview with a CRL spokesperson, please contact Ricardo Quinto at