Suit Alleging Student Loan Provider Misapplied Payments Advances

A lawsuit alleging federal student loan servicer Great Lakes Educational Loan Services Inc. applied prepayments to interest despite promises to the contrary will mostly move forward following a ruling by a federal court.

Jeffery Witz’s claims of common law fraud and violations of the Illinois Consumer Fraud Act may proceed because he sufficiently alleged that he was harmed and suffered damages because of it, Judge John F. Kness ruled for the US District Court for the Northern District of Illinois.

Witz, who had five loans serviced by Great Lakes, alleged the company deceived him and other customers in their website’s explanation of prepayments. He claimed the website said that excess payments above the minimum amount would apply first to interest accrued since the last payment, then to the principal of the highest-interest loan.

Witz said he initially began paying off his loans at the minimum amount, which only covered interest. Then he began paying extra payments towards his loans, expecting that the extra payments would go towards the principal, as the website said. Instead, Witz said Great Lakes put all of his extra payment towards interest.

This alleged deception meant interest continued to accumulate on the principal, costing borrwers more money in the long run.

The judge found that Witz had alleged enough information to show how he was financially harmed through the alleged deceptive practices because he experienced financial loss due to the deceptively heightened loan principal. These allegations were also enough to defeat Great Lakes’ argument that Witz failed to allege damages, Kness said.

Kness also rejected Great Lakes’ assertion that the proposed classes were unascertainable, overbroad, or would require individualized factual determinations. To the extent that the class isn’t well defined it can be narrowed in the future, and whether individual determinations will predominate can be assessed after discovery, the judge said.

Witz’s claim of unjust enrichment was dismissed, however. Witz claimed that Great Lakes received compensation from the federal government for servicing his loans, but he failed to show that he had any interest in that money.

Witz is represented by Edelman, Combs, Latturner & Goodwin LLC and Strauss Borrelli PLLC. Great Lakes is represented by Vedder Price PC and Brownstein Hyatt Farber Schreck LLP.

The case is Witz v. Great Lakes Educational Loan Services Inc., N.D. Ill., 6/24/25.