Student Loan Lawsuits

How to Strike Back and Prevent a Judgment Against You

You can be sued when you default on a student loan. Though it’s more common to face a lawsuit for a private student loan, the federal government has the option of suing you in federal court.

The good news is that a student loan lawsuit is often an opportunity to resolve disputes regarding ownership of the loan and shoddy accounting. Private student loan lawsuits can also give you access to settlement and repayment plan options that otherwise may not exist.

When you defend the lawsuit, you get your chance to make the collector prove every part of their case.

Does the collector have the right to collect the debt? Make them prove it.

Have they calculated the correct amount due? Make them prove it.

Have they followed the collection laws?  Make them prove it.

Collection Efforts Before a Lawsuit

When you’re in good standing on a private student loan, a servicer sends bills and you make payments. That changes when you fall behind.

For the first 180 days or so, you’ll get calls and letters from the servicer in an effort to get you back in good standing. Though the student loan servicing company may not have many options for you, it’s in their best interests to keep you from falling into default because they get paid only if a loan is in good standing.

If you don’t bring the account current, the servicer will send your student loan back to the owner of the loan for collection. Many private student loans originate from a bank and are immediately bundled together and sold, which is why you may not recognize the name of the creditor listed on a collection letter.

Collection efforts usually include phone calls and letters, with the student loan owner sending your file to different collection agencies over time. These collection agencies are subject to federal and state rules governing their conduct, and you may be able to sue if a collection agency violates your consumer protection rights.

Ultimately, the loan holder will make a decision to sue you for the unpaid balance. If you’ve got a cosigner on the loan, that person may be sued as well.

How Long Can a Private Student Loan Take to File a Lawsuit?

The time limit for a lawsuit to be filed is called the statute of limitations, and it varies from state to state as well as the type of legal action. In California, you can be sued for collection on a private student loan for 4 years beginning with the date the loan goes into default. New York gives the creditor 6 years from the date of default. Other states provide for longer or shorter time periods.

There are various ways to stop the clock or reset it entirely, so it’s a good idea for you to understand how the law works in order to avoid mistakes.

The Beginning of the Lawsuit

A lawsuit begins by filing a Summons and Complaint with the civil court in your county. The creditor pays a filing fee, the court enters the case into the system, and the court system is officially involved.

The creditor now has a limited amount of time to serve you and anyone else who they may be suing. Service can be performed in a variety of ways, including:

Personal Service: Someone personally delivers a copy of the Summons and Complaint to you, then files an affidavit with the court detailing the date, time and location of delivery.

Substitute Service: If the process server tries at least 3 times to serve you personally but is unable to do so, they can deliver the Summons and Complaint with someone over the age of 18 at your home or work location.  The server must also mail a copy of the documents by regular mail at the location where the documents were delivered, and file an affidavit with the court regarding service.

Service By Mail: California allows the server to mail the papers to you by regular mail to your home or mailing address. The server then fills out a Proof of Service and files it with the court. New York also allows service by mail, but it’s considered valid only if you sign an acknowledgement and return it to the creditor.

Service by Publication: If the creditor can’t find you and doesn’t have your home or work address, the court may grant permission to publish the Summons and Complaint in a newspaper in the area where you’re likely to be.

Responding to a Student Loan Lawsuit

Once you’ve received the Summons and Complaint, the clock immediately begins to count down your time to respond. If you miss your deadline, the student loan lender’s attorney can request that a default judgment be entered against you. That judgment is the court’s final decision regarding your liability for payment of the student loan.

A judgment cuts off your defenses and eliminates your rights to force the student loan company to prove the case. That’s why you need to spring into action immediately by taking these actions.