CASE UPDATE: Third Circuit Court Allows AG Shapiro’s Case Against Student Loan Giant to Move Forward

July 27, 2020 | Topic: Consumers

Major decision in Navient proceedings will also help protect consumers in future lawsuits

HARRISBURG—Attorney General Josh Shapiro today announced an important win in a decision from the United States Court of Appeals for the Third Circuit, as part of the Office of Attorney General’s ongoing court battle with Navient, the nation’s second-largest servicer of federal and private student loans.

“Today’s decision is a big step in favor of all Pennsylvania consumers, especially anyone with student loans,” said Attorney General Shapiro. “Navient repeatedly and deliberately put their own profits ahead of the goals of every borrower who worked to better their lives through education. Navient has attempted to delay this case at every turn and failed yet again with the Third Circuit Court’s decision. Despite their efforts, my Office won’t stop pursuing Navient until I know that they can’t deceive Pennsylvanians again. The decision also makes clear consumers won’t be left unprotected when the Federal government fails to step up as has happened all too often during the current administration.”

In October 2017, Attorney General Shapiro sued Navient for engaging in unfair and deceptive lending and failing to offer proper repayment plans to students.  In December 2018, the United States District Court for the Middle District of Pennsylvania denied Navient’s Motion to Dismiss in its entirety. Navient appealed this ruling and, today, the Third Circuit Court of Appeals affirmed the district court’s ruling.

As a result of this court order, discovery will resume and the case will proceed towards trial.

A few of the key conclusions in the 42-page Order are:

  • The Court rejected Navient’s core argument, that the Federal Consumer Financial Protection Act (CFPA) prohibits states from bringing CFPA claims where there is already a pending lawsuit by the Consumer Financial Protection Bureau (CFPB) to address the same violative conduct. The Court wrote that CFPA’s “plain meaning” is “that the Pennsylvania attorney general may bring an action to enforce the [CFPA].”
  • The Court rejected Navient’s argument that parallel state and Federal lawsuits would waste judicial resources. Among other reasons, the Court wrote that, “states may be able to pick up slack when the federal Government fails to enforce and regulate. If the Bureau were under pressure to settle or withdraw its lawsuit, states would still be free to protect the rights of consumers in their states.” The Court noted that “Navient’s CEO has lobbied the Bureau to drop its lawsuit.”
  • Navient tried to have the Attorney General’s state law claims tossed by arguing that the Federal Higher Education Act (HEA) preempts state laws that prohibit unfair and deceptive acts and practices. The Court rejected Navient’s preemption argument, holding that “Section 1098g does not expressly preempt claims to the extent they are alleging affirmative misrepresentations rather than failures of disclosure. . . . The Commonwealth’s core allegations . . . are that Navient improperly steered consumers into costly forbearances and made misrepresentations to consumers regarding the recertification of their [income-driven repayment] plans. This included misrepresenting to consumers that Navient would inform them of the date by which they needed to renew and misrepresenting the consequences of failing to renew. To the extent the Commonwealth faults Navient for failing to disclose or notify borrowers of certain information, it does so only because Navient’s failure to disclose certain information furthered the affirmative misrepresentations Navient voluntarily chose to make.”

A total of 1.76 million Pennsylvanians collectively owed $70.9 billion in private and federal student loans as of December 2019. The average student loan debt for a new college graduate in Pennsylvania was $37,061 in 2018 – second highest among all states.

Senior Deputy Attorney General Howard Hopkirk argued the case before the Third Circuit.

Student borrowers who believe they have been subject to these or other unfair or deceptive practices are encouraged to file a complaint with the Office of Attorney General at They can also call 800-441-2555 or email

# # #