Rising tuition costs and subsequently increasing student loan debts are contributing to billions of dollars in borrower defaults. In response, debt collection agencies and law firms are aggressively filing lawsuits to collect the money owed. Fortunately, the judicial system allows for defenses that can help borrowers. Creditors often do not have the means to meet the strict legal guidelines for pursuing the suit. Defenses against student loan lenders such as National Collegiate Trust and Navient primarily focus on standing or issues that student loan creditors have with ownership of the debt, a lack of proper business records or hearsay, licensing, the Statute of Limitations, and a general creditor lack of compliance.
Firstly, the plaintiffs filing the suits should be able to prove their ownership of the loan. Third party debt-buyers and guarantors, who purchase debt from the original creditor, have the most trouble with this. In the absence of documented proof, plaintiffs often end up either withdrawing or losing the suit. Furthermore, creditors need to prove firsthand knowledge of their business and loan records for their admissibility in court to avoid hearsay. In order to even use some court systems such as New York, creditors must have a license to operate in the state’s jurisdiction or be registered as a debt-collector. Along with the burden of proof, creditors also need to have filed the suit within the time designated by the statute of limitations. Time also poses an issue when creditors do not provide court requested information needed to move the case forward. Thus, there are a number viable defenses that can be used in private student loan cases both to potentially dismiss cases and to use these defenses as leverage to obtain affordable settlements reducing the debt by 40%-75% off the total amount.