Student loan defaults have dramatically increased causing a lot of these lawsuits and collection activity.  What happened in many student loan cases is students and especially minority students were defrauded. The school and lender knew the education the student received would not repay the loan.  However the school sold a worthless education to the student to make a profit.  The lender sold the unaffordable loan to the student to profit on a loan guaranteed by insurance, the government or sold to investors.  The student was the last thing the for-profit lender and school was concerned with.

We defend private student loan lawsuits in state court or file a bankruptcy to defeat them.  Minorities were steered by private for profit schools into worthless degrees that couldn’t possibly repay the debt.  Students are often given deferments until the deferments run out but the loan eventually goes into default.   What is happening is those loans are going into default by the millions.  Although the federal student loans has many programs that can save a student from default (at the cost of taxpayers), private loans are guaranteed to fail.   

Bankruptcy is an Option to defending a student loan

Bankruptcy can discharge VA and most service connected student loans automatically because separate statutes enable them to be discharged after 5 years or no waiting period.  But the majority of student loans require that a student qualify for an undue hardship.  Even if a student cannot get a discharge of the loan, filing bankruptcy is often a strategy to making the loan affordable or uncollectible.  If private student loans are a problem there are many defenses in state court.   These defenses include the statute of limitations that says in Kentucky if the loan has not been paid for 15 years then the loan is uncollectable.  The statute of limitations in some states only requires the loan be 3-5 years old to be uncollectible.   In some states like Kentucky making any payment on the loan restarts the statute of limitations.  Merely filing a Chapter 13 and moving to a state with a shorter statute of limitations will defeat most private student loans.

Government loans have few defenses and the statute of limitations and age of majority defense does not apply to those loans.  However private loans can be aged until they are uncollectible.  Federally funded student loans have not been dischargeable since 1998 except for when a judge finds that “undue hardship” of the debtor should allow the loan to be discharged.   Since 2005, student loan debtors have had to prove “undue hardship” to discharge private loans.  Prior to 2005, private student loans which were over five years old were discharged automatically if you filed bankruptcy.  Proving undue hardship in an adversary proceeding is a separate lawsuit that the poor debtor normally can’t afford.  But studies show about half of the undue hardship lawsuits succeed.  Just by filing an adversary the lenders will often offer a settlement on favorable terms if you ask rather than face explaining to a judge what happened.


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