How to deal with private student loans

Unlike federal student loans, borrowers have few good options for dealing with unmanageable private student loan payments. If your private loan has gone into default, here’s what you need to know.

your options for defaulted private loans

You basically have three options for dealing with a private student loan in default: (1) negotiate a settlement or payment plan with the debt collector; (2) wait to be sued and defend yourself in court; (3) try to wipe out the private loans in bankruptcy.


Private student loan borrowers do not have the protection of federal income-based repayment options. You’ll have to work with the debt collector and try to agree on a reasonable settlement or payment plan you can afford.

Defend yourself in court

If the debt collector won’t be reasonable about settlement, another option is to wait to be sued and defend yourself in court. There are a variety of defenses available in a private student loan lawsuit. While the best case scenario would be getting the case thrown out, in most cases pushing back in court will soften the collector’s bargaining position and get you a more reasonable settlement.

Discharge in bankruptcy

It is difficult, but not impossible, to wipe out private student loans in bankruptcy. You should consult with a bankruptcy lawyer experienced in dealing with student loan issues to see if discharge might be a viable option for you.

Your rights when dealing with private loan debt collectors

Knowledge is power and you should educate yourself on your rights when dealing with private student loan debt collectors. The Fair Debt Collection Practices Act forbids collectors from using misleading, abusive, or harassing collection tactics. You can sue a debt collector who breaks the law even if you owe the debt and there are many benefits to holding a debt collector accountable.

Common FDCPA violations in student loan collections include misleading threats about garnishment and lying to you about wiping out your student loans in bankruptcy.