If you’ve fallen behind on your student loan debt, you may be faced with some legal challenges. Lenders can take legal action to get their money back from unpaid loans.
Being sued for defaulted student loans can be scary. That’s the point. Lenders want to get your attention to make you more likely to agree to their terms.
Although you may feel like you’ve hit rock bottom, there’s nothing to be ashamed of. There are still a few things you can do to help you through this situation:
- Get the background information.
- Talk with a student loan lawyer.
- Answer the lawsuit and go to court.
Before we dive into these options in more detail, let’s discuss how student loans can get to this point and how you can prevent yourself from winding up in court.
Lawsuits for private student loans
Your student loan lender won’t automatically sue you the day after you miss a payment. The truth is, hiring a law firm and filing a lawsuit against you takes time and money your lender doesn’t want to spend. There is a process your student loan will go through before a suit.
Here are the steps your loan will go through before a lawsuit:
- When you’re more than 30 days late making your student loan payments, your loan will become delinquent. It will remain delinquent until you bring your account current and pay any late fees you accrued.
- If you continue missing payments long enough, your student loans will then go into default. Federal student loans will enter default after 270 days pass without you making a payment. Private student loans can default after 120 days, depending on the lender.
- Once your loan enters default, the entire loan balance will become due. From this point, the lender may send your loan to a collection agency.
- If the situation drags on without payment, a lawsuit is one of the next steps private lenders may take.
Private student loan lenders are more likely to file a lawsuit as it’s their most effective way to get you to pay. If you are sued by your student loan lender, you will receive a summons to appear in court.
Lawsuits for federal student loans
Federal student loans are unlikely to have a lawsuit filed since the federal government has numerous methods to get money from you without suing you. These can include wage garnishment, the Treasury Offset Program, and more.
The Default Resolution Group will handle your defaulted federal student loan, either directly or by handing the loan off to a private collection agency.
Is Navient really forgiving loans? Navient offers federal student loans. These loans may be eligible for federal student loan forgiveness programs, such as Public Service Loan Forgiveness or an income-driven repayment plan. It’s best to look into these options before going into default, as you will be rendered ineligible for many of them if you fall behind on payments.
4 steps for dealing with a student loan lawsuit
If you’re being sued for student loans, don’t panic. There’s a well-established procedure that can help you deal with the fallout.
Here’s what you need to do if you’re being sued for your student loans:
- Get background information.
- Speak with a student loan lawyer.
- Answer the lawsuit.
- Head to court.
Take a deep breath and tackle this one step at a time. One of the biggest mistakes I see borrowers make as a student loan lawyer is to ignore the situation — that’s not something you want to do here, as it can have serious consequences.
Step 1: Get background information.
When you’re served with a lawsuit, it’s natural to feel overwhelmed.
You, your friends and family, and your co-signer have likely been hounded with phone calls. You have no idea how much you owe on your student loans. You don’t even know how student loan lawsuits work.
The key is to gather the information you need and respond, not react, to the lawsuit.
Read through the summons and look for the following information:
- What court you’re being sued in
- Who is suing you
- How much they’re suing you for
- When you have to respond by
That last detail is crucial: the response deadline. The last thing you want to do is miss your court date and lose without having offered a student loan lawsuit defense.
If you do, a default judgment could be entered against you. This means you could be facing private student loan wage garnishment.
Step 2: Speak with a student loan lawyer.
Even if you’re thinking about representing yourself in court, you need to get legal advice from a lawyer that works with student loan borrowers.
The reason is these private student loan lenders and collection agencies do this every day. Chances are, you don’t know as much about the student loan lawsuit business as they do.
By working with a student loan lawyer, you can get advice from someone who knows this process inside and out. They can tailor a strategy that’s unique to your situation and guide you through each step.
Go to Google and search: “student loan lawyer” and “your location.” Then, start calling lawyers in your area to schedule an appointment. (Or, set up a chat with me.)
To make the most of your and the lawyer’s time, write down your questions ahead of time. This way, you can make sure all of your questions are answered.
If you decide to hire an attorney at that point, your work is done. They will handle everything moving forward. You’ll likely just need to show up on your court date with your attorney. If you’re still set on representing yourself, you have some more work to do.
Step 3: Answer the lawsuit and head to court.
Let’s break down this process of answering and appearing in court piece by piece. Here’s what you need to do:
First, look through the lawsuit documents and find the complaint.
You’ll need to go through the numbered paragraphs and answer the petition. For most of them, your answer will either be to admit, deny, or say you can’t answer for a particular reason.
You will also want to add any defenses you may have. Some common borrower defenses include:
- The loan has been paid
- The statute of limitations has lapsed (more on this later)
- The company suing you doesn’t have the standing to sue you
- The company suing you can’t admit their records
- The company suing you isn’t licensed to do business in your state
- The loan is current
- Someone other than you borrowed the loan (such as identity theft, forgery, etc.)
- The amount you’re being sued for is wrong
- The loan was discharged in bankruptcy
Another defense is that it could sometimes invalidate the agreement if you were a minor when you signed the loan.
If you’re feeling confused trying to answer these paragraphs, you may be better off hiring a student loan lawyer to help you prepare your answers. They have experience working with these sorts of lawsuits and know what will help you plead your case well.
Step 4: Go to court.
After you prepare your answer, you’re ready to go to court on the scheduled date.
When you go, approach the bailiff and tell them your name. This will accomplish two things. First, you’ll make sure you’re in the correct courtroom. Second, and more importantly, it lets the court know you’re there and you’re ready to defend yourself.
From here, you may be approached by the attorney who filed the private student loan lawsuit. They might offer you a settlement or ask the case be continued. No matter what happens, make sure you get it in writing, signed by the judge.
Other possible outcomes in a student loan lawsuit
By the time a lawsuit happens, your options are pretty limited. If you’re facing a private student loan lawsuit, you’re likely not going to get approved for a student loan refinancing or a consolidation loan.
Student loan rehabilitation is usually reserved for federal student loans. However, a few private lenders do offer rehabilitation as well. This leaves you with either reaching a settlement or hoping the statute of limitations has passed.
Reaching a settlement
If you have a lump sum of money, you may be able to negotiate a settlement for your student loans.
The process of settling private student loans is pretty straightforward. You make your offer. The lender either accepts your offer or counters it.
Keep going back and forth until a settlement is reached. Over the years, I’ve seen many types of settlements:
- Lump sums
- Monthly payments
- A lump sum with monthly payments
There are few limits on private student loan settlements. So don’t be afraid to negotiate!
But remember, before you send them a penny, get the deal in writing and signed by the lender. This eliminates potential misunderstandings or either party going back on their agreement.
Passed statute of limitations
The statute of limitations can be helpful for your case if it applies, but it’s unlikely and won’t lead to a loan cancellation. Typically, many disclaimers and caveats get in the way of the statute of limitations.
The statute stops when you’re in a deferment or forbearance, when you make a payment, and even when you file bankruptcy. The timeline on the statute of limitations also varies from state to state.
Typically, your student loans are subject to the statute of limitations for the state you live in. But if you’re sued, the court may use a different statute based on what state the lawsuit was filed or language in your loan’s original paperwork.
Due to these reasons, relying on the statute of limitations to bail you out of your lawsuit shouldn’t be your number one strategy.
Should I sue for my student loan?
Student loan lawsuits have made their way in the news lately. Instead of lenders suing borrowers, the tables are turning. Class-action lawsuits are being filed against schools and student loan servicers themselves.
Several Navient lawsuits are currently underway regarding the Public Service Loan Forgiveness (PSLF) program.
In one case, a group from the American Federation of Teachers claimed that Navient misguided them into student loan repayment and forbearance programs. This caused them to miss out on payments that would have counted towards the PSLF program.
In a separate case, a group of student loan borrowers sued the Trump administration’s U.S. Department of Education.
The goal was to propel education secretary Betsy DeVos and her administration into processing the stalled applications for the Borrower Defense to Repayment program.
If you’re having a hard time keeping up with the latest class-action lawsuits against various student loan companies or aren’t sure if they apply to you, that makes sense. The complexity of legal proceedings is why I often say it’s best to talk with a student loan lawyer.
A lawyer can get you up to speed with lawsuits regarding the Department of Education that may affect you. If you may benefit from filing a case with the Consumer Financial Protection Bureau (CFPB), you can start planning for it.
That’s why I recommend working with a professional and making a plan to work on your student loan situation here and now, particularly if it’s come to legal action.
Can’t pay your loans? You have options.
Why do I need to pay my student loans? You need to pay your student loans to avoid severe financial penalties and other consequences. For one, your credit report will be damaged due to your late payments, default status, and collections. You’ll even be ineligible for further federal student aid.
Financially, you’ll end up paying a lot more in late fees, collection fees, and potentially court costs. Additionally, your wages could be garnished, and your tax returns and Social Security benefits can be offset.
If you’re having trouble paying your student loans, it’s best to reach out to your lender before you reach the point of being sued. Being proactive and working with your lender ahead of time can help you find alternatives to keeping you out of hot water.
While it’s up to your lender whether to offer you any debt relief, some common solutions are:
- Income-driven repayment: You’ll need to provide your lender with your financial information (i.e., pay stubs, tax returns, bank statements). Then you’ll be given a payment plan based on how much you make.
- Forbearance: If you’re struggling financially, forbearance can suspend your payments for a period of time until things recover. You then elect for other student loan repayment options.
- Consolidation: You can combine your student loans to fall under one student loan servicing company with one interest rate and one monthly payment. This is different than a refinance since you will need a loan in good standing to combine with the loan in default.
Expert help for real results.
Each student loan lawsuit is individual. You’re dealing with a specific lender, in a particular state, in a different court. On top of that, your loan’s history is unique. To do what’s best for you, you may need to do more than spend a few minutes on Google.
I’d love to help you. Schedule a free 10-minute call with me to discuss the options for your case. We can go over your situation before your court date.
After that, whether you decide to take this on yourself or work with me further, you’ll at least know where to go from here.