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

430 words|2.2 min read|Categories: Collection companies & Debt buyers, Student Loans|By |Published On: May 19th, 2018|Last Updated: February 8th, 2023|

Share this article

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 - Martindale-Hubbell Award
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
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 - Martindale-Hubbell Award
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

In Case You Missed It

  • Published On: June 29, 2024

    From the National Consumer Law Center "NCLC" a toolkit to deal with your student loans, 5/2024 Whether you are just starting your student loan journey or have been dealing with student loan debt for decades, [...]

  • In today's consumer landscape, credit cards are the normal tools for managing finances and making purchases. However, having credit card debt can lead to financial stress and vulnerability to predatory schemes. Recognizing the importance [...]

  • NEW STUDENT LOAN REPAYMENT PLAN, plus UPDATES (at end of this article) SAVE – “SAVING ON A VALUABLE EDUCATION” “SAVE” – New Student Loan Repayment Plan (8/23) [...]

  • Published On: July 19, 2023

    IMPORTANT PROGRESS FOR STUDENT LOAN BORROWERS WHO HAVE BEEN IN REPAYMENT TWO DECADES OR MORE Posting from the National Consumer Law Center Important Progress for Student Loan Borrowers Reposting from NCLC, July [...]