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When you’re looking at a significant private student loan debt, your options are limits to two – pay or don’t pay.
If you can afford to make the payments, you should do so as quickly as possible. The faster those private student loans are paid in full, the less you’ll wind up paying in interest charges.
But fail to make payments and you’ll find that there’s no help for you. Federal student loan programs such as income base repayment, Pay As You Earn, and rehabilitation simply don’t exist.
In fact, there’s no legal difference between a private student loan and a standard bank loan. The only time a distinction is drawn is when you’re in bankruptcy court, which is when you find out just how difficult it can be for most people to wipe out the obligation in bankruptcy.
When there are no formal repayment options, no bankruptcy relief and no ability to repay the debt … what do you do?
My recommendation (and it may be a controversial one) is to consider letting the default happen.
What Happens When You Default On Your Private Student Loans
Make no mistake – defaulting on your private student loans is serious business.

• You’ll go into collections and your credit score will suffer.
• You’ll receive phone calls and letters.
• The unpaid balance will be reported to the credit bureau each month.
• And the private student loan lender may sue you.

How To Minimize The Effects Of Default
You can stop the phone calls and letters by invoking the provisions of the state and federal debt collection laws. Demand that the collection stop contacting you, and any further collection efforts must stop. Any phone calls or letters from the collector received after this “cease and desist” letter is in their hands is a violation of the law.
If you dispute the debt to the debt collector, under the credit reporting laws that account must be listed as disputed. All further reporting must cease immediately.
But nothing’s perfect – the damage will be done to your credit score, and the student loan lender can still sue.
The Myth And Reality Of Student Loan Lawsuits
A private student loan lender can sue you for only a certain amount of time. Once the statute of limitations expires, the debt is unenforceable and goes away forever.
But let’s say that doesn’t happen, and the private student loan lender sues you within the time period allowed by law.
First, that’s unlikely to happen right away. While you wait for a lawsuit to come, you can save some money to put towards a possible settlement.
Second, remember that the lender is required to prove every aspect of your liability in order to get the right to collect any money from you. That’s right, a lawsuit is not the same as a judgment – and the only way for a private student loan lender to collect through either a wage garnishment or bank account levy is a judgment.
Without a judgment, there’s nothing the private student loan can do against you.
Third, if you defend the private student loan lawsuit then there’s a far better chance you can get the debt settled on good terms. Just as you’re afraid of losing the lawsuit, so is the lender’s lawyer. The lender is concerned that the proof they offer up isn’t good enough, the accounting not exact enough, and the chain of ownership from the original lender to what is undoubtedly a debt buyer not firm enough.
Risk And Reward
There’s always a risk when you default on a private student loan.
You may get sued and lose the case. On the flip side, defend the lawsuit and you’ll be dealing with a lawyer rather than a debt collector. the lawyer’s got a better chance of having authority to settle the case on better terms for you.
You may need to borrow money for a car or a home mortgage during this ordeal. On the flip side, if you can’t afford to pay the private student loan then your credit score is going to plummet anyway. Paying less than the amount due each month won’t help your score.
It’s not an easy choice to make, and it’s definitely something with which you want to discuss with a lawyer (as opposed to a debt settlement company, which typically won’t be in a position to give you legal advice). But for someone with a full understanding of the risks, this may be a winning solution.

Student loan lawyers love IBR, or income-based repayment. When it comes to federal student loans, nothing provides more flexibility than a repayment plan tailored to your ever-changing income.
Made less money last year? No worries, your federal student loan payment will go down.
An income rebound means the payments will rise, but never more than the standard 10-year repayment amount.
Even better is the fact that your unpaid balance is discharged after 25 years of payments (less if you qualify for Public Service Loan Forgiveness).
There are a number of online calculators out there, but the formula is so easy you can handle it with a piece of paper and a pen and these four steps.
Look up the poverty level guidelines for your family from the Department of Health and Human Services website. For 2014, the poverty levels for the 48 contiguous states and the District of Columbia are listed below.

Multiply the appropriate poverty guideline by 150%. To make it easier, here’s the number to work with:

Subtract your adjusted gross income from the number you calculated in the previous step. Your adjusted gross income is the last line on the first page of your IRS Form 1040.
Take this number and multiple it by .15, then divide by 12.
The resulting number is your monthly IBR payment. If the IBR payment amount is less than the amount you’d be required to pay under the standard 10-year repayment plan, you will qualify for income-based repayment.
This is only the starting point, however. If you’re married then you need to figure out if it makes sense to file taxes separately from your spouse and how to apportion your dependents.
If you’re in default on your federal student loans then you’ll need to get that situation resolved through either rehabilitation or consolidation before you can opt for income based repayment.
It’s a complex process, but once you take control of the situation you’ll find that your life improves significantly.

The Consumer Financial Protection Bureau has filed a lawsuit against the debt collection firm of Fredericak J. Hanna & Associates and its three principal owners "for operating a debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe."  The CFPB complaint alleges that the Hanna firm files thousands of lawsuits that are based on faulty or unsubstantiated evidence.
According to CFPD Director Richard Cordray the Hanna firm is “taking advantage of consumer lack of legal expertise to intimidate them into paying debts they may not even owe.  Today we are taking action to put a stop to these illegal debt collection practices.”
The CFPB alleges that the Hanna firm “operates like a factory” by producing hundreds of thousands of lawsuits without any meaningful attorney involvement against consumers who may not actually owe the debt.  One attorney at the Hanna firm signed over 130,000 lawsuits in a two-year period which the CFPB says is misleading to consumers since no attorney could actually review that many lawsuits for accuracy.
The Hanna firm also systematically uses sworn statements (“affidavits”) from its clients attesting to the validity of the debts even though it is obvious that the signers could not possibly know if the information is correct. 

The Hanna firm relies on deception and faulty evidence to drag customers to court and collect millions, . . . We believe they are taking advantage of consumer lack of legal expertise to intimidate them into paying debts they may not even owe.  Today we are taking action to put a stop to these illegal debt collection practices.” Richard Cordray, Director of the CFPB.

Are these types of lawsuits filed in Nebraska?  Absolutely, and it is common for these lawsuits mills to attach essentially worthless affidavits to the lawsuit or to offer such sworn statements in Summary Judgment motions.   These sworn statements generally are signed by an employee of the debt buyer!  The statements usually state something like this:  “I know from my experience in reviewing such records and from common knowledge of how Credit Cards work that those records are made and maintained by individuals who have a business duty to make entries in the records accurately at or near the time of the event that they record.”
See the problem with this statement?  The statement is not “I am the custodian of the credit card company’s business records.”  Rather, the statement is “I know a guy who maintains these records.”  To admit such statements into evidence as a Business Record exception to the Hearsay rule of evidence (See Nebraska Rule of Evidence 27-803(5)), the sworn statement must be made by a record keeper of the credit card company, not the debt buyer.  But those statements are hard to get, so the debt buyers use these deceiving sworn statements to fool the Courts and the uneducated defendants that they have evidence of the debt when they really do not.  This is the misleading practice the CFPB is calling out as deceptive, misleading and illegal.
 
 

  The Consumer Protection Bureau (CFPB) slapped Ace cash express with a $5 million dollar fine and ordered $5 million in restitution and refunds to borrowers. The CFPB found that “Ace used false threats, intimidation, and harassing phone calls to bully pay day borrowers into a cycle of debt,” said CFPB Director Richard Cordray.  Ace... Read more »
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