Private Student Loan Lawsuit: What to Expect and How to Respond

The first step when you’re sued over a private student loan is to respond by the court’s deadline. Filing an Answer preserves your defenses and prevents the lender from winning automatically.

If you ignore the lawsuit, the court can issue a default judgment. That judgment allows wage garnishment, frozen bank accounts, or property liens.

A private student loan lawsuit happens when a lender claims you broke your loan contract by missing payments. Unlike federal loans, which rely on government collection tools, private lenders must file a lawsuit in civil court to collect. Lawsuits are usually a last resort after other collection efforts fail.

Lenders usually declare a loan in default after three to four months without payment. At that point, they may accelerate the loan, meaning they demand the full balance immediately instead of just the missed installments. Even then, most lenders wait a year or more before suing. Often the loan is charged off first—an accounting step that removes it from their books but doesn’t erase what you owe.

If collection calls, letters, or third-party agencies don’t work, the lender—or sometimes a debt buyer—can sue you for breach of contract, claiming you failed to keep the loan agreement. If the court rules in their favor, the judgment can last 10 years or more, and interest continues to build.

Related: What Happens If You Default On a Private Student Loan?

Summons and Complaint

A private student loan lawsuit begins when you’re served with two documents: the summons and the complaint.

• Summons: Lists who is suing you, where the case is filed, how much is claimed, and the deadline to respond.

• Complaint: Explains the lender’s allegations—usually that you signed a promissory note, borrowed money, and didn’t pay it back.

Sometimes the plaintiff is a debt buyer you don’t recognize. In that situation, the complaint should include proof they own your loan.

Deadline to Respond and Consequences

In most states, you have 20 to 30 days to file an Answer. In it, you can admit, deny, or explain the claims against you. Filing on time keeps the court from ruling without hearing your side.

If you miss the deadline, the court may enter a default judgment. That judgment gives the lender powerful collection tools: wage garnishment, frozen bank accounts, and property liens. Unlike federal student loans, private lenders must win a judgment in court before they can collect.

If you’re sued for a private student loan, you may have defenses that can help you fight the case or negotiate a better outcome. Courts require the lender to prove their claims, not just make them.

Statute of Limitations

Every state sets a time limit, called the student loan statute of limitations, for when lenders can sue. For private student loans, this period usually ranges from three to 10 years.

If the lender files after that deadline, you can raise the SOL as a defense and ask the court to dismiss the case. Be careful: in many states, making a small payment or admitting the debt can restart the clock.

Lack of Standing and Missing Documents

To win, the plaintiff must prove they own your loan and have the right to sue. Original lenders like Sallie Mae or SoFi usually have the paperwork. But debt buyers often struggle to provide a full chain of custody student loans
record that proves how your loan was transferred. If they can’t produce the promissory note or payment history, you may be able to challenge their case.

Other Possible Defenses

Other defenses may include identity theft, errors in balance calculations, improper service of court papers, or unfair lending practices by the lender. Not every case will include these issues, but raising them can force the lender to prove their claims instead of winning by default.

Borrowers facing a private student loan lawsuit usually have several ways to resolve the case. The best choice depends on your finances and how strong the lender’s claims are.

Negotiate a Settlement or Payment Plan

Most lawsuits end in settlement because trials are costly and uncertain for lenders. Borrowers often explore negotiating student loan payoff as a way to close out the case.

• Typical settlements fall in the 40%–70% range of the balance owed.

• Lump-sum payments usually secure the lowest settlement offers.

• If you can’t pay a lump sum, you may still be able to set up a structured payment plan.

• Always get the agreement in writing, and confirm the lawsuit will be dismissed once payments are completed.

Fight the Case in Court

Filing an Answer allows you to challenge the lawsuit directly.

• If the lender lacks documents or cannot prove ownership of your loan, you may win outright.

• Even if you don’t win, forcing the lender to prove its case may push them toward a better settlement.

Consider Bankruptcy

Private student loans can sometimes be discharged in bankruptcy, though the process is challenging. Borrowers often ask can you file bankruptcy on student loans, and the answer is yes—but only if you prove undue hardship in a separate case, usually under the strict Brunner Test. Courts consider:

• Whether you can maintain a minimal standard of living.

• Whether the hardship will likely persist.

• Whether you made good-faith efforts to repay.

While bankruptcy discharges are rare, more borrowers have succeeded in recent years by showing long-term financial hardship.

Courts give strict deadlines when you’re sued. Missing them has serious consequences, but you can protect yourself by responding on time.

File an Answer with the Court

Your first step is to file an Answer, your written reply to the complaint. Filing an Answer:

• Prevents the lender from winning automatically through a default judgment.

• Preserves defenses like statute of limitations or lack of standing.

• Shows the court you are actively participating in the case.

If you miss the deadline, the court may issue a default judgment. That judgment allows the lender to garnish wages, freeze bank accounts, or place liens on property.

Seek Legal Help

After filing an Answer, consider getting legal assistance. An attorney can:

• Challenge weak cases by requiring the lender to prove ownership and balances.

• Negotiate better settlement terms.

• Guide you through bankruptcy if it becomes a last-resort option.

If you can’t afford a student loan lawyer, look into legal aid groups, law school clinics, or ABA pro bono programs.