Problems with Private Student Loans

Student Loans

Students at different levels of higher education take out loans—whether federal, private or both—to finance their schooling. Students see the money borrowed from loans as investments in their futures as well as in their future earnings. However, sometimes students are unable to secure high–paying jobs, and instead, are faced with mountains of student loan debts that they are unable to pay.


Student loan debt is at an all-time high. A recent report by the Federal Reserve suggests that American borrowers owe about $1.3 trillion. Private student loan debt makes up more than $12 billion of the total $1.3 trillion in student loan debt.

Discharging student loan debt in bankruptcy is an unlikely alternative. This is true whether students borrow from the federal government or private institutions. Generally, federal law prohibits discharging student loan debt, including that from private student loans, in bankruptcy. Borrowers can discharge their student loans when filing for bankruptcy only if they meet specific conditions.


Some borrowers of private student loans may have a lifeline. Recently, private student loan debts have been “wiped out” due to missing paperwork. The New York Times has reported that a major lender, the National Collegiate Student Loan Trusts (National Collegiate), is struggling to prove in court that it owns the student loans in question.

Courts have thrown out cases in which National Collegiate failed to prove ownership or at least a chain of title. In fact, a random sample of nearly 400 National Collegiate loans found not a single one had assignment paperwork documenting the chain of ownership. The courts’ decisions can unburden borrowers from thousands of dollars of student loan debt.

Relief from private student loan debt is not available to everyone. As a result, borrowers must consider other alternatives that may help alleviate their student loan burdens. And because student loans are, in most circumstances, not dischargeable in bankruptcy, borrowers must look to alternatives that make it easier to survive and manage their debts.

Bankruptcy May Be Able to Ease Your Overall Debt Burden

While discharging student loan debt in bankruptcy is difficult, filing for bankruptcy may still help individuals struggling with student loan debt. Bankruptcy can discharge many other types of debt, including credit card bills, past-due rent, certain tax debts, civil judgments, business loans, auto loans, utility bills, and others. If you are struggling with these types of debt, discharging them through bankruptcy may make it easier to afford your student loan payments and help you achieve financial freedom sooner.


Student loan debt is a burden affecting millions of borrowers across the United States. A skilled attorney, such as Jory L. Trease at JLT Law, can review your financial situation and discuss reasonable alternatives with you. You do not need to be excessively burdened by student loan debt. Schedule your free consultation by calling (801) 596–9400 today. You can also contact us by filling out and submitting our online contact form, available here.