An increasing phenomenon in the debt collection industry is that banks are filing lawsuits to collect on student loan debt, specifically private student loan debt not backed by the Federal government.

There is an estimated $5 Billion in defaulted student loan debt currently in the U.S.

The student loan industry is dominated by two types of loans, federally-backed student loans and private student loans. Federal student loans are given the highest priority within the debt industry, and it is not necessary for them to sue you to collect the money you owe. They can, and will, simply garnish your wages to collect their money, or utilize an offset on any future tax refunds you may have for as long as it takes to collect. If you are currently behind on a federally-backed student loan, our recommendation is to get in touch with your lender immediately to work out a payment plan or deferment. Please don't wait until they begin their own collection process, as it will be an enormous burden to get them to stop.

We have found that private student loan lenders generally do not possess the required documents to prove their lawsuit is valid.

Chad Johnson Managing Partner

Private student loans are an entirely different story. These are student loans financed by banks or private funds with no backing of the federal government. If you are not able to pay them, they do not have the same collection recourse as federal student loans. This means that they cannot simply garnish your wages or offset your tax refunds if you don’t pay them. In order to collect the money owed, they must file a lawsuit.

We outline the debt lawsuit process in general here on our website. All of that applies to a student loan lawsuit. However, student loan lawsuits are much more nuanced and complicated for a myriad of legal reasons.

We have found that private student loan lenders generally do not possess the requisite documents necessary to prove their lawsuit is valid. Many times, these lenders pool their debts together and sell them to third parties. Those third parties then create trusts where they pool even more debts together. And in the end, those trusts end up being the party who files suit against you. In cases where a trust files a student loan lawsuit, it is extremely hard for the Plaintiff in the case to prove valid chain of title from the original lender to the trust. In fact, the New York Times recently wrote an article on student loan lawsuits and how their paperwork basically goes “missing.” You can view that article here.

Defending private student loan lawsuits takes a great amount of experience and skill. We have taken many private student loan lawsuits to trial and won all of them. It is very important to understand that these lenders have the burden of proof that the underlying debt is valid. Due to the nature of their industry, where the accounts are sold and transferred over and over, it usually results in our clients paying ZERO to the Plaintiffs who sue them. In the approximately 300 student loan lawsuits we have fought, we have saved our clients over $5 MILLION DOLLARS.

We are happy to discuss your specific student loan lawsuit, and can quickly figure out the best defense for your situation. Give us a call and let us get to work on your behalf.

The information contained in this webpage is for general information and educational purposes and is not legal advice. Reading these posts does not create an attorney / client relationship with the law firm of Johnson & Bryan.