October 20, 2019

Sloppy Accounting and Payment Processing Plague Private Student Loan Servicers

failure to apply extra student loan paymentIn the United States about 79% of student loans are either issued by the U.S. Department of Education or guaranteed by this agency. The remaining 21% are issued by private lenders 1  There was $157.8 billion of outstanding private student loans in Fiscal Year 2009]. Private student loans exist because federally issued or guaranteed loans have caps. For example, a direct federal loan (called a Stafford loan) has a cap of $2,000 per year for families who earn more than current income limits 2. If you attend an expensive private college, there may not be enough federal student loans (which can include Perkins and Plus loans as well) available to you and your only option will be private student loan lenders.

Unfortunately, private student loans do not include many of the borrower protection regulations that apply to government student loans. For example, if you go into default with your government issued or guaranteed student loans, you have unique options to cure that default and restructure your loans into a new payment plan based on your income.

In the case of a private student loan, if you go into default, you have no right to cure that default and you could find yourself facing lawsuits and wage garnishment.

In my student loan law practice, therefore, I have fewer options to offer my clients who are struggling with private student loans. There are some options, however – including Fair Debt Collection Practice Act violation suits, statutes of limitation and even bankruptcy. [Read more…]

  1. According to the U.S. Department of Education, the projected amount of outstanding federally issued or guaranteed student loans for Fiscal Year 2011 is  $745.5 billion.   About 8% of outstanding federal student loans are currently in default.
  2. Read more about the borrowing amount caps here.