Updated: 2021-09-02 by
If you default on a federal or private student loan and you don’t take steps to get out of default, you may be sued. A lawsuit is most likely if you have delinquent private student loans, because private lenders need a court judgment before they can use strong collection techniques like wage garnishment. The federal government has more immediate collection options than private lenders, so it brings lawsuits less frequently.
That said, it’s not safe to turn your back on your defaulted federal student loans and hope they’ll go away. Even if you don’t get sued, the consequences of default are harsh. What’s more, the government has forever to decide whether to sue you to collect your defaulted loans. Private lenders, on the other hand, are subject to a statute of limitations -- the time limit during which they can sue you. In Ohio, the statute of limitations for suing on a delinquent student loan is usually eight years.
If the worst happens and your loan holder sues you, here are a few things you should do.
Respond on Time
Open all certified mail and other notices about the court case. It’s rarely a good idea to ignore a lawsuit; the only time this might make sense is if you’re absolutely certain you have no defenses to the loan holder’s claim and you can’t be forced to pay the money back -- for example, because you have no assets or all your property is exempt from collection (see below).
Usually, it’s a good idea to hire a lawyer to help you fight a student loan lawsuit. You may be able to find one to help you at low or no cost. A lawyer can:
- help you figure out whether you have defenses against the suit
- complete the complicated paperwork on time, and
- represent you in court.
If you can’t find a competent, affordable lawyer, you may have to handle the lawsuit yourself. There are good do-it-yourself resources to assist you with the process. Arming yourself with the right resources will help to ensure that you won’t overlook important court rules or miss essential deadlines. For information about finding a student loan lawyer and other resources, see the end of this article.
If you don’t respond to the lawsuit on time, the court will most likely enter a judgment in favor of the loan holder. For private student loans, this will open the door to more aggressive collection actions against you, such as garnishing your wages, putting a lien (legal claim) on your home or other property, or attaching your bank accounts.
Look for a Valid Defense
The best way to make a student loan lawsuit go away is to win it. There are many effective defenses to student loan actions, including:
- The holder of your private loans waited too long to sue you (see above).
- You were the victim of identity theft and never agreed to pay the debt.
- You paid what you owed on the loan, but the loan holder failed to credit your account.
- The loan holder is suing you for more than you agreed to pay on the debt.
- You were unable to finish your program of education because your school closed, or you qualify for another type of loan cancellation.
- Your school fraudulently obtained the loans in your name.
- You discharged the debt in a bankruptcy proceeding.
- The loan holder failed to provide proof that it has the legal right to sue you to collect the debt.
You will have to be able to prove your defense to the court. See the end of this article for resources that can help you.
Know What You Can Keep If You Lose
Even if your loan holder gets a judgment against you, you won’t be required to pay anything if you’re what is known as “judgment proof.” This means that you earn and own very little, and the law prevents creditors from taking what you have.
Usually, the law protects at least a portion of the equity in your home and car, most of your earnings, and your retirement accounts. You will most likely also get to keep all of your clothes, household goods, tools you need for your job, and some public benefits.
To learn more about using these kinds of property exemptions to protect what you own, see the Lawsuits page on the Student Loan Borrower Assistance (SLBA) website or “Using Exemptions to Protect Property From Judgment Creditors” on Nolo.com.
Consider Negotiating With Your Lender
At any time during or after the lawsuit, you can attempt to negotiate a payment plan. Even a loan holder who has a judgment against you may prefer to work out a way to settle the debt; it could be easier than going to the additional expense and trouble of trying to collect it. If you make a reasonable offer, the loan holder may call off plans to go after your wages, bank accounts, or other property.
Get Help When You Need It
Facing a lawsuit isn’t usually something to do alone. There are resources available to help you find an affordable lawyer in your area. For help, see "How to Find a Student Loan Lawyer in Ohio."
If you can’t find a lawyer or decide you’d rather go it alone, we recommend starting with a good do-it-yourself guide like Represent Yourself in Court, by Paul Bergman and Sara Berman, available from Nolo.com.