If you default on a student loan and the creditor files a lawsuit seeking payment, you may have a defense to the lawsuit. If one of the below defenses applies in your situation, you may not have to pay the student loan debt. However, you must raise any applicable defense in a formal response to the lawsuit, otherwise you will most likely lose the chance to defend yourself.
To learn more about lawsuits for the collection of debts, visit our Creditor Lawsuits topic area.
Common Defenses to Student Loan Lawsuits
If you are sued for nonpayment of a student loan, check to see if any of the below situations apply to you:
You never agreed to pay the debt. If you are a victim of identity theft, file a report with the three major credit reporting bureaus, Equifax (www.equifax.com), TransUnion (www.transunion.com), and Experian (www.experian.com). Next, file a report with your local police or in the community where the identity theft took place. Keep a copy of the report for your records. Also, contact the U.S. Department of Education Office of Inspector General Hotline: e-mail firstname.lastname@example.org, 1-800-MISUSED (1-800-647-8733).
You do not owe the debt or you current on your payments. Review your loan documents, payment records, and credit report for inconsistencies or miscalculations. Also, the creditor may be seeking attorney’s fees or collection costs that are too high or prohibited by law.
The debt has been discharged in bankruptcy. Although it is difficult to discharge student loan debt in bankruptcy, if you filed a Complaint to Determine Dischargeability during your bankruptcy case and you succeeded in discharging that debt, then the student loan creditor can’t collect on that debt. (To learn how to discharge your student loan debt in bankruptcy, see Student Loan Debt in Bankruptcy.)
Your loan was cancelled because you were unable to finish your educational program due to your school’s closure. If your school closed so that you couldn’t get your degree, you may be able to cancel your loan altogether. However, only FFEL and Direct Stafford loans, PLUS, or Perkins loans may be cancelled. (To learn about these loans, and to find out if you have one, see Types of Federal Student Loans.)
In order to apply for the cancellation, Perkins Loan borrowers must apply to the school that made the loan or to the loan servicer. Direct Stafford and PLUS Loan borrowers must apply to the U.S. Department of Education and FFEL borrowers should apply to the lender or agency holding the loan.
If the lender or loan servicer approved your cancellation request, provide the supporting documentation in your response to the lawsuit. If your cancellation request is still pending at the time of the lawsuit, indicate that in your response to the lawsuit and provide supporting documentation. If you have not been sued yet and need time for your loan cancellation to be approved, you may want to request a forbearance. A forbearance stops collection efforts, but interest still accrues.
(To learn more about these federal programs, visit our topic page on Student Loan Cancellation, Deferment and Forbearance.)
The student loan creditor waited too long to sue you. Federal student loans have no statute of limitations. However, private student loans are subject to your state’s statute of limitations (time limits on how long to wait before suing) for legal action to collect on written contracts. To learn more about statutes of limitations and the time period that applies in your state, see Statutes of Limitations & Debt Collection.
The creditor failed to document the debt. In many states, the creditor must attach a copy of the original loan agreement to the lawsuit. If the loan account was sold to another creditor, the debt collector must provide proof, such as an assignment (a bill of sale), authorizing that party to sue in order to collect the debt. If the account has been sold to another party, then that party must prove that it has the right to sue to collect the debt. If the creditor fails to do this, you may be able to petition the court for a more definite statement or to dismiss the lawsuit.
If you are struggling with student loan debt, visit our Student Loan Debt area for help.