Skip to main content

Search

Student Loan Law: 16.7.2.1 Typical Private Student Loan Contract Provisions

Federal limits on the grounds for default and acceleration of federal student loans do not apply to private student loans. Like any other private loan, grounds for default and acceleration are set out in the credit agreement, as modified by any applicable federal or state law. A CFPB report found that most private student loans trigger default and acceleration after the loan is 120 days past due.283

Private student loans may specify in the loan agreement additional grounds for default other than missed payments, including:

Student Loan Law: 16.7.2.2 Limits on Default, Acceleration, and Change of Terms

The grounds for a lender’s declaration of default or acceleration of the loan must meet three hurdles. First, the grounds must clearly be set out in the credit agreement. Second, the grounds must comply with any applicable state law that limits grounds for default or acceleration for consumer transactions generally.

Student Loan Law: 16.1.3.2 Income Share Agreements

Some schools and coding camps offer income share agreements (ISAs). The ISAs—which are increasingly being offered at public and nonprofit schools, as well as for-profit schools46—are made by the schools themselves or by a separate financial services company. Under an ISA, students are obligated to pay a fixed percentage of their income after graduation for a fixed period of time.

Student Loan Law: 16.9.1 Introduction

The federal government has a number of remedies to collect on a federal student loan even without obtaining a court judgment, such as tax intercepts, administrative wage garnishment, and offset of federal benefits. These prejudgment remedies are not available for collection of a private student loan. Instead, a private student loan lender must first obtain a court judgment to authorize wage garnishment and seizure of bank accounts. In addition, private student loans are often assigned to others, meaning that an assignee will often be suing on the debt in court.

Student Loan Law: 8.6.1 Introduction

This section reviews the primary defenses to federal student loan collection litigation. Most of the defenses discussed in this section can be raised in response to other collection actions as well.262 These defenses should generally be available to private student loan borrowers as well.

Student Loan Law: 6.1 Overview

Student loan defaults are a serious problem, exposing large numbers of borrowers to powerful collection practices, hefty collection fees, and damaged credit.1 This chapter provides an overview of student loan default, including the meaning of default, the general consequences of default for borrowers and for institutions, and the scope of the student loan default problem.

Student Loan Law: 6.3.2 Consequences of Default on Private Loans

Private student loan creditors do not have the same range of powerful collection tools as the government. Generally, they hire third-party debt collectors to pressure borrowers to pay. If unsuccessful, the creditors can sue and attempt to obtain judgments. If this occurs, borrowers have exemption rights under state laws.29 That said, raising defenses and exemption rights in a debt collection action can be difficult due to the fact that most borrowers do not have access to attorney representation.

Student Loan Law: 6.5.1 Introduction

As of December 2022, 7.4 million borrowers have federal student loans in default.69 A 2018 analysis predicted that nearly 40% of borrowers may default on their student loans within twenty years of leaving school and, even more troubling, that 70% of Black borrowers will eventually default.70 In the years leading up to the COVID-19 pandemic, between

Student Loan Law: 2.5.1 Introduction

The Higher Education Act includes limits on the amounts students are allowed to borrow. Financial aid counselors at institutions work with the Department to determine whether a student is eligible for aid and how much aid they will receive.119 In limited circumstances, the Higher Education Act authorizes financial aid counselors to provide borrowers with additional aid.120

Student Loan Law: 8.3.3 Post-Default Collection of Direct Loans and FFEL Program Loans

Other than during the student loan payment pause and the one-year “on-ramp” period,53 borrowers are in default on Direct Loans or FFEL Program loans if they fail to make required payments for 270 days.54 This nine-month period offers a valuable opportunity for borrowers to seek alternatives to default, such as more affordable repayment plans, discharge, cancellation, deferment, and/or forbearance.55 The Department may also accelerate the loan

Student Loan Law: 8.4.4 Avoiding Collection Fees

The actual amount of collection fees can vary by the type of collection activity and by which entity is collecting (i.e., the Department, a guaranty agency, or a school). Additionally, as noted above, collection fees may be avoided or reduced as a result of time-limited initiatives, such as Fresh Start.

Automobile Fraud: 2.1.6.2 Deceptive Sales Even When Lemon History Disclosed

Lemon laundering today, though, is more subtle than a manufacturer repurchasing a lemon and sending it on to another buyer—what buyer of a slightly used car from a manufacturer would not suspect lemon laundering? A car is termed a lemon because authorized repair shops have tried unsuccessfully on a number of occasions to correct the problem. When the manufacturer repurchases the “lemon,” the manufacturer will again request an authorized repair shop to correct the defect.

Automobile Fraud: 2.1.6.3 Lemon Laundering Involving Auction Sales

Perhaps for this reason, the most common method that manufacturers use in selling a lemon buyback is not to sell the car to a dealer who knows about the car’s history, but to sell the car through a dealers-only automobile auction, where the chances of covering up that history are optimized. The manufacturer may submit to the auction a memorandum of sale with only a brief description of the vehicle’s lemon history.

Automobile Fraud: 2.1.6.4 “Goodwill” Buybacks and Other Evasions

Many manufacturer buybacks today are termed “goodwill” buybacks, which means that an arbitrator or court did not order the buyback. Instead, the manufacturer agreed to settle the case by buying the car back before being ordered to do so. The manufacturer can claim that there was nothing seriously wrong with the car, but it just bought the car back to avoid litigation costs or to create good will. In this situation, the manufacturer may not even disclose the car’s lemon history when it sells the car.

Automobile Fraud: 10.3.3 Drafting a Compelling Complaint

Ideally, significant investigation of the vehicle’s history has been accomplished by the time the attorney is ready to draft and file the complaint. Some attorneys embed documents and photographs into the text of the complaint.

Automobile Fraud: 10.3.6.7 When the Sole Designated Arbitration Forum Is Unavailable

Arbitration agreements typically specify one or more arbitration forums that will administer the arbitration, such as the American Arbitration Association (AAA) or JAMS. These two organizations have consumer protocols and the AAA requires creditors to register their arbitration agreements. AAA may refuse to administer the arbitration if the creditor has not registered their agreement, if the arbitration agreement does not meet consumer protocols, or when the creditor has refused to participate in arbitration in the past. JAMS may have similar policies.

Automobile Fraud: 10.3.6.10 Individual Arbitration

When an enforceable arbitration agreement forecloses class arbitration, class action court litigation, and individual court litigation, adequate client representation may require raising the consumer’s claims in an individual arbitration proceeding. While this approach is not preferred, under some circumstances consumers may achieve good results, particularly if the selected arbitrator has an open mind on consumer claims.

Fair Credit Reporting: 9.1.1 Background

Inaccurate information in a credit history can present serious, if not devastating, problems for a consumer; unauthorized access to a consumer report represents a significant breach of a consumer’s financial privacy. The worst manifestation of these offenses may be when a culprit takes information with malicious intentions for the data. Identity theft has become an alarmingly frequent invasion of privacy.

Fair Credit Reporting: 9.2.1.2 Definition of “Identity Theft”

The FCRA defines “identity theft” as “a fraud committed or attempted using the identifying information of another person.” Regulation V further defines the term to mean “a fraud committed or attempted using the identifying information of another person without authority.”29 Regulation V defines “identifying information” to mean:30

Fair Credit Reporting: 9.2.1.3 CRA Annual Reports to the CFPB

Each nationwide CRA must prepare and submit to the CFPB an annual report summarizing consumer complaints received on identity theft or fraud alerts.42 The CFPB could use this information to produce a nationwide picture of the effect of identity theft on the accuracy and integrity of consumers’ credit files.

Fair Credit Reporting: 9.2.2.1.1 Introduction

The FCRA provides for three varieties of alerts that consumers may add to their files with nationwide CRAs.43 These alerts differ in their initiation requirements, time periods, and demands imposed on users. However, all three alerts require the CRA receiving the alert to refer it to the other nationwide CRAs. In theory, this process allows consumers to issue the alert to all the CRAs with “one call.”