Navient and Sallie Mae, who are still likely the largest providers of private student loans in the country are continuing collection efforts against the thousands of defaulted consumers in the country. However, the pace of collection and especially litigation to enforce on collection has dramatically decreased in the last few years from our perspective. Navient and Sallie Mae used to be some of the most aggressive private student loan lenders when it came to collection, litigation, and judgment enforcement efforts. We don’t know if it was because of Covid or a number of class action and other lawsuits filed against both Navient and Sallie Mae, but we are seeing far fewer lawsuits these days although they still pursue fairly aggressive collection efforts. What we have seen is these creditors shifting to selling their loans to third party debt-buyers, primarily LCS Capital. LCS has primarily been the company that sues consumers for these private student loan matters more often than Navient or Sallie Mae. This is generally good news because LCS Capital should have a more difficult time proving that they are the rightful owners of the acquired debt as they have to prove standing and privity by showing a proper chain-of-title or assignment of the debt from creditor to creditor and they must overcome the hearsay requirements by being able to provide a witness to the transfer of debt, whom has actual knowledge of the event amongst other requirements. Debt buyers tend to be sloppier than original creditors and often do not have the necessary legal documents to establish a foundation in court so that they can meet their burden of proof in order to win the case.
Whether defending against Navient, Sallie Mae or LCS Capital, the strategy is the same. The assets and property of the consumer must be protected. Any lawsuit must be answered to prevent a default judgment and then aggressively defended to keep the burden on the plaintiff and the leverage on the side of the consumer. Finally, any default judgment must be vacated as quickly as possible by filing an order to show cause to vacate before the statutory period to do so expires. Negotiating a reduced settlement balance is another option that we are able to achieve in most cases using the leverage acquired in litigation. Recently, we have been able to negotiate many of these private student loan collections matters internally with Navient and Sallie Mae before they even send them out to a collection agency although it can be settled with the collection agency or even law firm as well. Both Sallie Mae and Navient have gone as low as 70%-75% off of the total debt to resolve matters. They have also agreed to interest-free payment plans in most of the cases that we have negotiated with them, making it feasible for the consumer. These are fantastic settlement figures for original creditors. LCS Capital is a debt-buyer as discussed, which means that it should be as easier to resolve matters with them in these cases. Usually, LCS is represented by common debt collection law firms such as Portnoy Schneck, Relin Goldstein and Crane and Fein Such Kahn and Shepard in New Jersey. We have seen a general settlement range of about 50%-75% off of the total balance with LCS as well, although these typically have been in litigation scenarios as this is where we encounter them most of the time.
Although Sallie Mae and Navient private student loan matters have decelerated in the last few years it is important to be vigilant in defending against collection efforts by them and collection may present a great opportunity to negotiate a settlement for a significantly reduced balance whether with Sallie Mae, Navient or LCS Capital.