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Private Student Loan Default Guide

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  • Private Student Loan Default Guide

What happens when private loans go unpaid

Private student loans operate under contract law, not federal administrative rules. Once payments stop for 90-120 days, lenders charge off the balance and send it to a collection agency or law firm. From there you can expect phone calls, demand letters, and in many cases a civil lawsuit seeking a judgment. Knowing what is legitimate and what is bluff is the first step to protecting yourself.

Understanding your lender’s leverage

Private lenders cannot garnish wages or seize refunds without first suing you and winning a judgment. That process requires proof — a signed promissory note, a full payment history, and evidence that they own the debt. Many debt buyers cannot produce a complete file. A strong legal response forces them to show every document. When they cannot, the case can be dismissed or settled for far less.

Your rights under the Fair Debt Collection Practices Act

Even though private loans are contractual, collection agencies must follow the FDCPA. They cannot call repeatedly, threaten arrest, or discuss your debt with family or co-workers. You may demand validation in writing. Once that request is received, calls must stop until they provide documentation. Violations give you grounds to seek damages or force the collector to back off.

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  • The lawsuit process in plain English

    A lawsuit begins with a summons and complaint delivered by certified mail or a process server. You normally have 20–30 days to answer depending on your state. Ignoring it allows the court to enter a default judgment, giving the creditor the right to levy bank accounts or garnish wages later. Responding on time preserves your defenses. Our firm helps you file an answer and forces the creditor to prove every claim.

  • Settlement strategies that actually work

    Settlements on private loans are common because lenders know litigation is costly. Depending on the age of the debt and the evidence they have, settlements range from 40–70 percent of the balance. We negotiate written agreements that include debt forgiveness language and credit report updates. The goal is to close the case and make sure you are not chased again for the same balance.

  • Avoiding common traps

    Do not make a small “good-faith” payment or sign a new agreement without review. In many states, that resets the statute of limitations and revives the debt. Always get a settlement in writing before paying. Never provide bank account access or post-dated checks to a collector. If you are unsure whether an agency is legitimate, contact us to verify before engaging.

  • How credit reporting is affected

    Private defaults appear on credit reports for up to seven years. Once the account is settled or the judgment satisfied, it will be marked accordingly. Over time its impact lessens, especially as new positive accounts report. We help you dispute inaccurate balances and follow up with the credit bureaus if lenders fail to update their reporting.

  • When bankruptcy is an option

    Private student loans can sometimes be discharged in bankruptcy if they do not meet the legal definition of a qualified education loan. Recent court decisions have opened the door for more borrowers to challenge these debts. If your loan funded a non-accredited program or was issued directly to you without school certification, discuss the details with us before assuming it cannot be wiped out.

Frequently Asked Questions

No. They must first sue, win, and obtain a judgment. Until then, wage garnishment is not legally allowed.
See also: Student Loan Lawsuits and FDCPA Rights.

You can file a motion to vacate a default judgment if service was improper. Courts often reopen cases when notice requirements were not met.
See also: How to Read a Garnishment Notice.

Yes, many lenders will negotiate if you can make a lump-sum payment. We confirm written terms before you pay so the balance is truly resolved.
See also: Debt Validation Letters That Work.

Yes, unless the settlement agreement or court order releases them. We always aim to secure co-signer releases in final settlements.
See also: Cease and Desist Letters for Harassing Calls.

Generally seven years from the date of first delinquency. Once paid or settled, it updates to “satisfied.”
See also: FDCPA Rights in Plain English.

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