Protecting the Rights of Consumers For Over 25 Years

We are seeing an increasing volume of collection lawsuits on private student loans.

In many cases, there are defenses which can be litigated on behalf of borrowers. Issues which frequently arise in such cases include:

1. Statute of limitations. Unlike federally-guaranteed student loans, private student loans are subject to state statutes of limitations. Brazos Higher Educ. Serv. Corp. v. Stinnett, 2017 WL 1103459 (Mich. Ct. App.
Mar. 23, 2017); State ex rel. Board of Regents for Uni. of Ok v. Livingston, 2005 Ok. Civ. App. 25, 111
P.3d 734 (2005); Prowley v. Hemar Ins. Corp. of Am., 2010 WL 1848222, at *3 (S.D.N.Y. May 7, 2010);
SLM Private Credit Student Loan Trust 2006-A v Milton, 2016 WL 5931369, at *2 (N.Y. Sup. Ct. Oct. 5,
2016). The federal statute exempting federal student loans from state statutes of limitation, 20
U.S.C. §1091a, only applies to loans and grants made “under this subchapter” of Title 20 of the
United States Code, i.e., federal student loans. Depending on the precise documentation in a particular case, these can be subject to either the 5 or 10 year Illinois statute.Eul v. Transworld Systems, 15cv7755, 2017 WL 1178537, *8-11 (N.D.Ill., March 30, 2017); Trujillo v. Asset Recovery Solutions, LLC, 17cv2303, 2017 WL 6816536 (N.D.Ill., Aug. 9, 2017). In this regard, it is quite rare for a student who has been granted a student loan to actually sit down and execute a note which sets forth all material terms of the transaction. Often the only document signed is an application in which the student promises to repay such amounts as shall be approved and disbursed, and which often leaves the loan program and repayment terms to be determined by the lender.

2. Title to the loans / licensure of claimed holder. There are often substantial questions concerning title to private student loans, if they are not held by the party to whom the documents are originally payable. SLM Private Credit Student Loan Trust 2004-B v. Bonet, 49 Misc.3d 1204(A), 26 N.Y.S.3d 216 (Table), 2015 WL 5737936, 2015 N.Y. Slip Op. 51399(U) (Civ.Ct., Sept. 14, 2015). We have seen cases where loans were supposedly transferred to unlicensed debt buyers.

3. Computation of amounts due. There are often substantial questions concerning the servicing of the loans and the computation of the amounts due, often arising from improper servicing of loans and provisions relating to forbearances and deferments. Russo v. Navient Solutions, LLC, 1:16cv316, 2017 WL 4220455 (D.Vt., Sept. 21, 2017); In the Matter of Citibank, N.A., 2017-CFPB-0021 (settling charges of “erroneous termination of borrowers' in-school deferments, resulting in late fees and student loan interest capitalizations”). We have seen “forbearances” that are not agreed upon by the borrower; these would not serve to extend the statute of limitations.

4. Issues relating to fraudulent or unaccredited schools and whether such matters are defenses with respect to the lenders under 16 C.F.R. part 433 or otherwise.

5. Noncompliance with protections for cosigners, including 815 ILCS 505/2S, which requires written notice to the cosigner prior to credit reporting or other collection action, so as to allow the cosigner to take over payments on the loan.

6. Usurious interest rates.

Many of these issues may also give rise to affirmative claims.

We are familiar with these and other issues, and can protect your interests. Please contact us if you are facing collection activity on a private student loan in Illinois.

The attorneys in our firm have a total of more than 100 years experience handling consumer lawsuits, including private student loan lawsuits. We look forward to hearing from you about this or any other consumer legal problem you wish to discuss. There is no charge for consultation.