Published On: May 19, 2018

Student Loan Debt Rises to $1.5 TRILLION in May, 2018

There are two types of student loans – federal and private.

Federal loans have some protections for the lenders that private student loans do not.  Every month lawsuits are filed by the thousands, many that are invalid, but if the borrower does not respond the court has no option but to award a judgment for the lender.


Below are five defenses may be successful in halting student loan collection cases.

The creditor cannot prove that it owns the debt.

Many private student loans are transferred by their original lender to investors through a process called securitization, in which thousands of loans are pooled together and sold as a package.  Lender needs to prove that it owns the loan – Lovett v. National Collegiate Student Loan Trust 2004-1

The creditor’s business records are not admissible.

There are rules governing how business records may be used in court. In a California case, National Collegiate Student Loan Trusts v. Nohemi Macias, an appeals court ruled that an employee of a debt collection firm was not qualified to verify the creditor’s loan records and, in her testimony, “effectively conceded that she was unable to do so”, therefore the creditor had nothing to support their case.

The debt is beyond the statute of limitations for collection.

Unlike federal student loans, collection of private student loans are controlled by the state and eventually the lender may lose their right to collect the debt.  In an Arizona case, National Collegiate Student Loan Trust 2004-2 v. Gallagher, an appeals court found that the creditor waited too long to sue because it was outside Arizona’s six year statute of limitations for breaching a written contract.  (Note – each state has a different statute of limitations for contract obligations).

The creditor is not licensed to do business in the jurisdiction.

Some states require “foreign corporations” — those based in other states — to register to operate in their area. Failing to do so can prevent creditors from using the local court system. SLM Education Finance Corporation v. Gray and National Collegiate Student Loan Trust 2006-2 v. Cowles.

A sample form letter if find that a creditor that does not comply with the state’s Corporation Business Activities Reporting Act.

The creditor failed to comply with court requests for additional information.

When courts ask creditors to provide additional documents, or produce witnesses to testify about their claims, the creditors often simply withdraw their lawsuits, according to borrowers’ lawyers.

For full article: 5 Flaws That Kill Student Loan Collection Lawsuits, By Stacy Cowley, Nov. 14, 2017

By |Published On: May 19th, 2018|Last Updated: February 8th, 2023|

Share this article

About the Author: Diane Drain

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Google Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Yelp Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Avvo Reviews
Avvo - Rate your Lawyer. Get Free Legal Advice.
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Alignable Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Better Business Bureau

“You folks are the BEST OF THE BEST in Arizona.” M.H.

You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.

“My only regret is that I didn’t find Diane sooner.” K.H.

I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.

“Filing for bankruptcy can be a stressful life event” R.A.

Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.

Related Posts

My intention is to put you back in control of your life
Start with $0 down*. We provide affordable payment plans.