Defenses to Private Student Loan Lawsuits: How Borrowers Can Fight Back

Defenses in a private student loan lawsuit are the legal arguments you include in your answer. They let you challenge the lawsuit itself, not just the balance claimed. The right defense can get the case dismissed, reduce the amount owed, or give you leverage to settle on better terms. Without raising defenses, the lender often wins by default.

When you’re sued on a private student loan, you can’t simply tell the court you can’t afford to pay. The law requires specific defenses that challenge either the lawsuit’s process or the debt itself.

There are two types of defenses:

• Procedural defenses — challenge how the case was brought (e.g., time-barred claim, no proof of ownership).

• Substantive defenses — challenge the debt itself (e.g., not your loan, misapplied payments, fraud).

Raise defenses in your answer to preserve them. Many are waived if omitted early, which is why filing a thorough answer to a student loan lawsuit matters.

Lack of Standing: No Proof of Ownership

To sue you, the plaintiff must prove it owns your loan. That means producing:

• The original promissory note

• A clean chain of title showing every assignment from the original lender to the current holder

If even one transfer is missing, the lender lacks standing. Electronic notes must also meet the E-SIGN Act requirements to be enforceable.

Courts across the country — especially in cases involving National Collegiate Student Loan Trust — have dismissed lawsuits when ownership could not be proven. Courts often state the rule plainly: without documentation, the case cannot proceed.

Improper Service of Process

Every lawsuit must be properly served. If the summons and complaint weren’t delivered correctly — for example:

• Papers left at the wrong address

• Papers never delivered at all

…the court may not have jurisdiction over you.

In debt collection, this problem is so common it has a name: “sewer service.” Improper service is not just a technicality. It can allow you to dismiss the lawsuit or, if a judgment has already been entered, to vacate the judgment.

Courts often hold special “traverse hearings” to decide if service was valid. If you weren’t served according to the rules, the case cannot move forward.

Sued for a Loan That Isn’t Yours

If the loan was never yours, you are not legally responsible for it. Debt buyers sometimes sue the wrong person, especially if you share a name with another borrower. In other cases, someone may have taken out a loan in your name without permission.

Courts require the lender to show a signed promissory note with your name on it. Without it, the lender’s claim may be dismissed. Supporting evidence such as a police report or an FTC Identity Theft Report makes this defense stronger.

No Contract or Missing Loan Documents

Many private loan lawsuits rely on incomplete or sloppy records. A spreadsheet of balances isn’t enough. The lender must produce the signed promissory note and accurate account records.

If those are missing — or if the chain of title is broken — you can argue there’s no enforceable contract. Some lenders try to rely on “lost note affidavits,” but courts often reject them unless they are detailed and credible.

Payment, Settlement, or Discharge Already Made

If you’ve already paid or settled the debt, or if it was discharged in bankruptcy, the lender cannot collect again. Always bring proof, such as:

• Bank statements

• Cancelled checks

• Payoff letters

• Bankruptcy discharge order

Errors are common. Servicers like Navient have been accused of misapplying payments and overstating balances. A payment defense may reduce the claimed amount, or, if the loan was fully satisfied, end the lawsuit entirely.

Fraud or Misrepresentation by a School or Lender

Some private loans trace back to deceptive practices by schools or lenders. For example, for-profit colleges often misrepresented job placement rates or credit transferability. Lenders like Navient helped push those loans despite knowing the schools were problematic.

Borrowers may invoke the FTC Holder Rule, which lets you assert defenses against the lender if the school engaged in fraud. Regulators have forced lenders to cancel loans tied to such misconduct — Navient agreed to cancel tens of thousands of loans linked to fraudulent schools.

If you can show that your loan was induced by fraud, you may persuade a court not to enforce it. Even if the loan isn’t automatically void, raising fraud as a defense often pressures lenders into settlement or dismissal.

FDCPA Violations

The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive or misleading tactics. Examples of FDCPA violations include:

• Collecting on a time-barred loan without disclosure

• Misstating the balance owed

• Threatening actions they cannot legally take

You can raise these violations as defenses or file counterclaims. Courts may reduce or offset what you owe, and in some cases award damages to the borrower.

Robo-Signing and False Documentation

Many student loan lawsuits fail because the evidence is unreliable. “Robo-signing” occurs when employees sign hundreds of affidavits a day. Often, they do so without reviewing the loan files. Some affidavits are notarized improperly or contain false statements.

The Consumer Financial Protection Bureau (CFPB) penalized National Collegiate Student Loan Trusts for filing defective robo-signed affidavits. Courts have dismissed lawsuits once borrowers exposed these practices. If you see generic or error-filled documents in your case, they’re worth challenging.

Bankruptcy Options for Private Loans

Certain private student loans may be easier to challenge in bankruptcy than federal loans. Some loans are not “qualified education loans” under the tax code and can be discharged without proving undue hardship. This includes loans for:

• Unaccredited schools

• Non-educational expenses

• Amounts beyond the school’s cost of attendance

For loans that do qualify, courts still apply the Brunner Test (minimal standard of living, persistence of hardship, good faith effort).

Recent Department of Justice guidance has also made bankruptcy relief more attainable, and judges are increasingly open to discharging private loans when the facts support it.

The strongest defenses usually include:

• Lack of standing

• Student loan satute of limitations

• Improper service

These focus on the lender’s burden of proof. Many cases fail once borrowers demand documentation. Substantive defenses like identity theft or missing contracts are also powerful if supported by evidence.

Arguments based only on inability to pay are not legal defenses and will not help your case. Courts decide based on law and evidence, not financial hardship alone.

You must raise defenses early. If you don’t raise them in your answer, the court may rule that you’ve waived the right to use them later. In most cases the loan is already in default, and knowing how to respond to a private student loan lawsuit ensures your defenses are preserved and the case is properly shaped.

After you raise defenses in your answer, the case usually moves into discovery. In discovery, you can demand documents such as:

• The original promissory note

• Complete payment history

• Bill of sale proving ownership

Discovery often exposes weaknesses when lenders cannot produce the required paperwork.

Strong defenses can also create leverage for settlement. If the lender knows its case is weak, it may agree to reduce the balance or dismiss the lawsuit entirely.

Many private student loan cases end in settlement once borrowers raise strong defenses. Knowing how to negotiate a settlement on a private student loan helps you turn those defenses into practical results.