College Game Plan

How to get a student loan debt collector off your back

Key Points
  • Students trying to bridge the gap between savings and scholarships increasingly turn to private loans.
  • In some court cases, this debt has successfully been dismissed.
  • For those struggling to repay their loans, there are also other ways to alleviate the burden.
How much to borrow for college

For those burdened by pricey private student loans, there are ways to get some relief; if not have the debt wiped out altogether.

In the middle of a legal dispute between creditors and student borrowers, dozens of borrowers have already successfully had their loans effectively erased after the loan providers failed to prove in court that they owned the debt on which they were trying to collect, according to a review of court records by The New York Times.

Those cases center around about $5 billion worth of student loan debt owned by National Collegiate Student Loan Trusts. When borrowers were sued after falling behind on payments, but showed up to fight the lawsuit in court, some judges dismissed the cases when National Collegiate couldn't prove ownership of the debt — basically, a glitch in their paperwork trail.

While most student borrowers rely on federal student loans, more than 1.4 million students a year use costlier private student loans to bridge the gap between the cost of college and their financial aid and savings, according to a recent report by LendEDU, an online marketplace for student loans and student loan refinancing.

For others who have fallen behind on their repayments and are at risk of being sued over their private student loan debt, the most important thing to do is to contact a lawyer and weigh available options, said Adam Minsky, an attorney specializing in student loan law.

"A lot of variables come into play," he said, including the state law, the court, the judge and whether the lender has the documents to validate the debt. Even if, "you raise defenses and prevail, the debt doesn't go away, it just means the debt is unenforceable," he added.

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But aside from this too-good-to-be-true scenario, graduates struggling to keep up with their payments should call their lenders or talk to a financial advisor about their options, said Kat Tretina, a researcher at Student Loan Hero, a student-loan management site.

"Some lenders will let you make interest-only payments or postpone your payment altogether until you get back on your feet," she said.

Alternatively, if you are having a hard time keeping track of multiple payments, you might consider consolidating them, although this won't save any money on the balance owed to creditors.

Some lenders will let you make interest-only payments or postpone your payment altogether until you get back on your feet
Kat Tretina
researcher at Student Loan Hero

A more advantageous scenario would be to refinance at a lower interest rate, particularly if you have a cosigner with excellent credit. This option "can save you thousands over the length of your repayment and you can pay it off sooner," Tretina said. (Even though there are risks for the co-signer.)

Otherwise, you could choose to extend the terms beyond the standard 10 years to lower the monthly payments to a more manageable amount. However, extending the term of the loan means you will ultimately pay more interest on the balance — which could be a small price to pay for some relief in the near-term.