What to Do When You’re Sued for a Private Student Loan

Updated on November 14, 2025

When you’re facing a private student loan lawsuit, your first step is to file an Answer before the deadline. That single action stops an automatic loss and keeps every option open—raising defenses, challenging ownership, or negotiating a settlement.

This guide explains why private lenders sue, how these lawsuits work, what happens after you’re served, and the steps that protect you from a judgment.

Why Private Lenders Sue and What a Lawsuit Means

Private lenders sue when your loan enters default and collection efforts fail. After enough missed payments, the lender accelerates the balance — the entire amount becomes due — and pushes the account into legal recovery. If calls and demand letters don’t work, the lender or a debt buyer files a breach-of-contract lawsuit to force repayment.

To win the case, the plaintiff must prove:

you signed the promissory note
you received the loan funds
you didn’t repay under the contract
they own the loan (often the weakest point for debt buyers)

Ownership problems are common when a debt buyer files the lawsuit. Missing assignments, incomplete payment histories, and broken chains of title can undermine their claim.

A lawsuit isn’t a judgment. It’s an escalation. You still control the outcome as long as you respond on time. Filing an Answer forces the lender to prove the case rather than winning by default and keeps settlement and dismissal on the table.

How a Private Student Loan Lawsuit Works

A lawsuit begins when you’re served with a summons and a complaint. The summons lists the court, the plaintiff, and your response deadline. The complaint outlines the allegations and the documents the plaintiff claims to have.

Most states give you 20–30 days to file an Answer. After that, the case moves through scheduling, motions, discovery, and—rarely—trial. Most cases settle or collapse before trial because lenders either negotiate or can’t produce complete documentation.

Debt buyers face the most problems. They must show a full chain of title, the promissory note, and a complete payment history. Missing records create leverage for dismissal or better settlement terms.

What to Do When You’re Sued for a Private Student Loan

1. File an Answer Before the Deadline

Filing an Answer stops a default judgment and forces the lender to prove its claim. If you miss the deadline, the court can enter a judgment without hearing your side.

2. Check the Statute of Limitations

Each state sets a deadline for suing on private debt. If the lender filed late, you can ask the court to dismiss the case. Small payments or written acknowledgments can restart the clock.

3. Review Ownership and Documentation

Debt buyers must prove they own your loan. That requires a complete chain of title, the original note, and accurate payment records. Missing links shift leverage in your favor.

4. Evaluate Your Defenses

Strong defenses include improper service, incorrect balances, identity theft, and missing documents. Raise only the defenses that apply. Weak claims undermine your credibility.

5. Negotiate a Settlement

Most cases settle. Typical settlements fall between 40–70% of the balance, with lump-sum offers getting the best discounts

6. Consider Bankruptcy if the Debt Is Unmanageable

Private loans can be discharged for undue hardship through an adversary proceeding. It’s demanding, but it can eliminate the debt and end the lawsuit.

What Happens After You Take Action

Filing an Answer slows the case and puts the burden back on the lender. That pressure often leads to better settlement terms or dismissal if their records are weak. If you settle, the case is dismissed after payment and no judgment is entered.

If you fight and win, the lawsuit ends with no further collection. But if the lender wins—or you didn’t respond—the court issues a judgment. That judgment allows wage garnishment, bank account levy, property liens, and ongoing interest until the debt is paid or settled.

FAQs

What happens if I don’t respond to a private student loan lawsuit?

You lose automatically. The court enters a default judgment, which allows wage garnishment, bank levy, and property liens. Once the judgment is in place, your leverage drops sharply.

Can I settle a private student loan lawsuit?

Yes. Most cases settle. Typical ranges are 40–70% of the balance, with lump-sum payments getting the steepest discounts.

What defenses work in private student loan cases?

The strongest defenses are statute of limitations and lack of standing. Debt buyers often lack complete documentation. Other defenses include improper service, incorrect balances, or identity theft

Can private student loans be discharged in bankruptcy?

Yes, in some cases. You must file an adversary proceeding and prove undue hardship. If successful, the debt is wiped out and all collection — including the lawsuit — ends.