Unpaid private student loan debt what are my options?


Recently on our legal forum a user asked, “I have not been able to pay my college loans. The college has served me court papers and is now taking me to court. I am unemployed, pregnant, and have a 2 year old son. What happens if they win a judgment against me and what are my options?”

If you have accumulated student loan debt you are not alone. In fact, the Consumer Financial Protection Bureau estimates that one in ten students now graduates with more than $40,000 in student loan debt, and the total student loan debt across the U.S. has reached more than one trillion dollars!

Credit decides to sue to collect unpaid student loan debt

Many students graduated in the last eight years into a relatively weak job market. Now, not only are students saddled with thousands of dollars of student loan debt, they are also unable to find employment and repay their loans.

So what do you do if  the private creditor has decided to sue for repayment by filing a lawsuit in court? It sounds like it may be too late to try to negotiate a repayment plan with them, which is too bad because if they had called and tried to negotiate they might have saved both of you time and money. Now, however, it’s time to decide what you need to do when you have been sued.

Steps after a lawsuit is filed against you by a private creditor

The first step is to determine if there are any defenses you can raise to win your lawsuit. Common defenses include the fact you already paid the debt, the amount due has been miscalculated, the loan was fraudulently obtained, or the private creditor has waited passed the statute of limitations for debt collection.

I lost in court after lawsuit to collect student loan debt

If you cannot successfully defend your case, however, the court will issue a judgment against you. This judgment will allow the creditor to use certain collection actions to collect the debt. Whether or not these tools will be successful, however, will depend on whether you have any income or assets the creditor can collect.

For example, if you do not have a job the lender will not be able to garnish your wages. State and federal laws will also protect certain assets or a specific dollar amount of your property from seizure.

So, assuming you have no assets which legally can be repossessed or sold, you really don’t have to worry about the judgment, unless your financial situation dramatically improves or you find a job. For instance, if you do get a job it’s likely the creditor will be able to garnish your wages.

Options for Federal Loan Debt

It’s also important to note that there are some difference between private student loans and federal student loans. For instance,  some students who owe money for a federal student loan, under certain conditions, may be able to have their loan forgiven. Whether or not they qualify will depend on when they borrowed the money and the federal loan program.

For example, under certain federal loan programs you may receive a discharge if you are now totally and permanently disabled, if your school closed, if you died, or if you entered certain governmental positions.

Creditors who have issued student loans secured by the federal government will also have fewer hurdles to jump when collecting unpaid student loan debt. For example, they will not have to get a court judgment prior to garnishing your wages.


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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.