Private Student Loan Lawsuit Rights and Options

Author

Posted Jan 5, 2025

Reads 915

Man In Black Suit Holding Banknotes And Credit Card
Credit: pexels.com, Man In Black Suit Holding Banknotes And Credit Card

If you're dealing with a private student loan lawsuit, it's essential to know your rights and options. You may be entitled to a discharge or forgiveness of your loan.

You can request a discharge of your private student loan if you're a victim of identity theft. This means the lender will cancel your loan and you won't have to pay it back.

Being sued by a private student loan company can be overwhelming, but you don't have to face it alone. You have the right to hire a lawyer to represent you in court.

If you're unable to make payments on your private student loan, you may be eligible for a deferment or forbearance. This can temporarily suspend or reduce your payments.

Understanding Your Rights

Under the Know Before You Owe Act, private lenders have annual reporting requirements that are monitored by the Illinois Attorney General's Office.

Borrowers have the right to know the terms of their loan before they sign. This includes information about their eligibility for federal financial assistance.

Private lenders are required to provide critical information to borrowers about their loan before they take it out. This helps borrowers make informed decisions about their financial obligations.

The Know Before You Owe Act was signed into law on August 26, 2021, to protect borrowers from predatory lending practices.

For another approach, see: Payday Loans Not Lenders

Dealing with a Lawsuit

Credit: youtube.com, Sued for a Private Student Loan? Go to Court

Take the lawsuit seriously, as ignoring the court action won't make it go away. Failure to respond in the time permitted by law gives the private student loan company the ability to get a default judgment against you.

A default judgment is a binding court order in favor of the lender, which means you'll lose the right to fight the lawsuit once it's entered. This is the end result for approximately 95% of all collection cases, including student loans.

If you're served with a lawsuit, talk with a lawyer, even if you decide to go it alone or do nothing. The consequences of losing a lawsuit can be severe, including wage garnishment, levy of your car, and a lien on your real estate.

Here are some potential consequences of losing a lawsuit:

  • Start a wage garnishment against you;
  • Levy your car;
  • Put a lien on your real estate;
  • In community property states like California, garnish your spouse's wages; and
  • Levy your bank account.

Navient Class Action Suit

In 2020, Navient, a student loan servicer, agreed to pay $1.7 billion to settle a class action lawsuit alleging it had misled borrowers about payment options and steered them into more expensive repayment plans.

Credit: youtube.com, How To File Navient Class Action Lawsuit? - CountyOffice.org

The lawsuit claimed Navient had engaged in deceptive practices, including failing to provide accurate information about income-driven repayment plans and automatic payment deferrals.

This lawsuit highlights the importance of being aware of your rights as a borrower and knowing how to navigate the complex world of student loan servicing.

The settlement provided relief to over 3.6 million borrowers who had been serviced by Navient between 2009 and 2019.

Many of these borrowers will receive a share of the settlement, which will be used to pay off outstanding balances or provide a lump sum refund.

Advice When Faced with a Lawsuit

Dealing with a lawsuit can be overwhelming, but it's essential to take it seriously from the start. Ignoring the court action won't make it go away, and failure to respond in the time permitted by law can lead to a default judgment against you.

This means you'll lose the right to fight the lawsuit, and the creditor can take severe actions against you. Approximately 95% of all collection cases end in default judgments because people don't respond.

Credit: youtube.com, What To Do If You Get Sued But You Don't Have The Money [Walkthrough]

A default judgment can result in the creditor being able to:

  • Start a wage garnishment against you
  • Levy your car
  • Put a lien on your real estate
  • In community property states, garnish your spouse's wages
  • Levy your bank account

It's crucial to understand the potential consequences of ignoring a lawsuit. Take the lawsuit seriously and consider seeking advice from a lawyer, even if you decide to go it alone or do nothing.

Student Loan Debt Relief

Student loan debt can be overwhelming, but there is hope for relief. The Attorney General's Office has been a national leader in investigating and enforcing consumer protection violations in the higher education field, including student lending.

They created the Student Loan Helpline, 1-800-455-2456, to provide struggling student borrowers with free resources about repayment options and information on avoiding default. Individuals with hearing or speech disabilities can reach them using the 7-1-1 relay service.

Millions of borrowers may have their private student loans wiped out due to Navient's actions. The company originated high-interest private student loans to college students attending predatory for-profit schools, which they are unlikely to repay.

Credit: youtube.com, Private Student Loan Lawsuits

To qualify for cancellation or restitution, borrowers must meet certain criteria, including attending specific for-profit schools, having delinquent loans, and residing in an eligible state. Here are the eligibility details:

  • Borrowers must have attended certain for-profit schools, such as Corinthian schools, DeVry University, the Art Institutes, ITT Technical Institutes, and others.
  • The student loans must have been disbursed between 2002 and 2014.
  • The student loans must have been delinquent for at least seven months prior to June 30, 2021.
  • The student loans must still be collectible under the borrowers' state statute of limitations, and they must still be reporting to the credit bureaus, as of June 30, 2021, are eligible.
  • Borrowers must live in an eligible state.

Millions of Borrowers to Have Loans Wiped Out

Navient, a private student loan servicer, has been ordered to cancel $1.7 billion in private student loans due to its improper actions. The company was accused of steering struggling federal loan borrowers toward forbearance instead of income-driven repayment or loan forgiveness programs.

The cancellation of these loans is a result of six separate lawsuits filed by 39 states. Navient must also make a one-time payment to the 39 states involved in the lawsuits and provide $95 million in restitution to 350,000 federal student loan borrowers.

To qualify for the loan cancellation, borrowers must meet certain criteria, including attending certain for-profit schools and having loans that were disbursed between 2002 and 2014. The loans must also have been delinquent for at least seven months prior to June 30, 2021.

Credit: youtube.com, Student loan relief: More help on the way for millions of borrowers

Borrowers must also live in an eligible state to qualify for the loan cancellation. Here are some of the eligible states:

  • AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, IL, IN, KY, LA, MA, MD, ME, MN, MO, NC, NE, NJ, NM, NV, NY, OH, OR, PA, TN, VA, WA, or WI

Eligible borrowers will be notified this summer if they qualify for relief. No action is required from borrowers to claim their relief.

Student Loan Bankruptcy Discharge

Discharging student loans in bankruptcy is a complex process. To wipe out student loans in bankruptcy, you'll need to file an adversary proceeding, a lawsuit against the student loan creditor.

This process can be daunting, but it's not impossible. The outcome depends on the court's decision, which may use the Brunner Test or the Totality of the Circumstances test.

To qualify for bankruptcy discharge under the Brunner Test, you'll need to prove three things: you can't maintain a minimal standard of living if you repay your loans, your financial situation will likely continue for a significant part of the repayment period, and you've made a good faith effort to repay your loans.

Credit: youtube.com, Discharging Student Loan Debt In Bankruptcy

The Brunner Test is a specific standard used in many courts, but other courts may use the Totality of the Circumstances test, which looks at all relevant factors in the case.

Here are the key requirements under the Brunner Test:

  • Based on your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans.
  • Your current financial situation is likely to continue for a significant part of the repayment period.
  • You have made a good faith effort to repay your student loans.
Vanessa Schmidt

Vanessa Schmidt

Lead Writer

Vanessa Schmidt is a seasoned writer with a passion for crafting informative and engaging content. With a keen eye for detail and a knack for research, she has established herself as a trusted voice in the world of personal finance. Her expertise has led to the creation of articles on a wide range of topics, including Wells Fargo credit card information, where she provides readers with valuable insights and practical advice.

Love What You Read? Stay Updated!

Join our community for insights, tips, and more.