Student loan collections class action lawsuit overview:
- Who: A group of student loan borrowers have filed a class action lawsuit against more than a dozen major student loan service providers.
- Why: Borrowers argue the student loan service providers have wrongly collected more than $1 billion in student loans that had already been discharged in bankruptcy cases.
- Where: The class action lawsuit was filed in New York federal court.
- What are my options: Check out student loan refinancing options with Credit Karma.
Major student loan service providers wrongfully collected several hundred thousand private student loans after they were discharged in bankruptcy cases, a new class action lawsuit alleges.
A group of borrowers claim more than a dozen student loan service providers — including Navient, Discover Bank, and Wells Fargo Bank, among others — have wrongfully collected substantially more than $1 billion in discharged loans.
Borrowers argue collections made on discharged loans are void, and that the funds they took are the property of borrowers and should be returned to them.
“The Defendants have wrongfully collected billions of dollars on these Discharged Loans based on the myth that these loans are not discharged in bankruptcy and that no legal action is required for the Defendants to collect on these debts,” the student loan class action states.
Borrowers want to represent a nationwide class of individuals who obtained a discharge from a US bankruptcy court prior to one of the defendants either collecting or attempting to collect a discharged loan.
Student loan creditors promoted ‘myth’ that private student loans are not discharged in bankruptcy, says class action
Borrowers argue, under “explicit provisions” of Section 523(a)(8)(B) of the Bankruptcy Code, a student loan creditor must meet certain requirements prior to obtaining a court judgment that its loan was not discharged in a bankruptcy.
“Yet the Defendants actively promote and rely upon the myth that Private Student Loans are not discharged in bankruptcy, and they promote this myth to the public and to Class Members as a crucial part of their business models, plans, and operations,” the student loan class action states.
Plaintiffs are demanding a jury trial and claim they are owed relief by the student loan service providers under the Declaratory Judgment Act and the Bankruptcy Code.
In other student loan news, the US Supreme Court ruled earlier this month that the Biden administration cannot forgive federal student loans, determining that the plan was government overreach.
Has a student loan creditor attempted to collect on your discharged student loan? Let us know in the comments!
The plaintiffs are represented by Michael B. Wolk of the Law Offices of Michael B. Wolk, P.C., E. Powell Miller, Peter A. Muhic, and Dennis A. Lienhardt of The Miller Law Firm PC, Steven Rhodes of Steven Rhodes Consulting LLC, and Brian A. Sullivan of Werb & Sullivan.
The Student loan collections class action lawsuit is Tate, et al. v. Pennsylvania Higher Education Assistance Agency, et al., Case No. 1:23-cv-06050, in the U.S. District Court for the Southern District of New York.
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219 thoughts onStudent loan servicers hit with class action alleging $1B in wrongful collections
This happened to me. I filed Chapter 13 2016 had my college loans in there . I was having a hardship. 2017 I turned the Chapter 13 to a 7. I was still having hardship so the Judge accepted all my college loans in that Chapter 7 2017. 2025 I’m being Bill over $90, 000 in loans. I the whole time I had out I had heart disease. Now I still trying to get the government or loan companies to dismiss my loans. The Judge did in a Chapter 7 2017. I also file several reports with the CBP and all the credit bureaus to reports those loans because they damages my credit for decades now. Couldn’t buy a house because of my debt ratio. Please help.
I filed bankruptcy in 1986 for medical bills and about $2400 student loan. It was discharged as this was before they started the non-discharge policy. My son started collage 25 years later and I took out a loan to pay for his living expenses. I later found that they had added my discharged loan to the balance of the loan that I had taken out later. I believe that I still have the paper work.