Private Student Loans

Private Student Loan Borrower Rights in California

If you are a Californian with a private student loan, you have new rights under a law that took effect in July 2022. The Private Student Loan Collections Reform Act creates new requirements that creditors, servicers, and debt collectors must follow. It also gives borrowers the power to get more information and to enforce their rights. (Civil Code section 1788.200 et seq.)

What type of loans are covered?

The law covers only private education loans. It defines private education loans as: 

This means that federal direct student loans are not covered, nor are FFEL (guaranteed) loans. But lots of private student loans are covered. For example, non-FFEL loans currently being collected by Navient, NCSLT, Transworld, AES, Student Loan Solutions, or Williams & Fudge are probably covered.

What are my rights under the law?

The Private Student Loan Collections Reform Act was passed to prevent companies from collecting on debt they have no right to collect. There are some companies whose business model is to collect on old, defaulted student loans they claim to have bought from lenders like Sallie Mae or Bank of America. But these companies sometimes don't have any proof that they bought the debt, or any information about what is actually owed. They try to scare people into paying them with phone calls and letters and lawsuits even though they have no legal basis to collect.

Written Information

As a result of these practices, the new law requires that companies trying to collect private education loans have a long list of information on hand before they contact borrowers and before they sue borrowers. That information includes 18 items, but some of the most important ones are:

That's all information the creditor, servicer, or debt collector is required to have on hand if they try to collect. However, they're not always required to give it to borrowers. As the law is written, they are only required to give it to borrowers after they have defaulted on their loan. Specifically, they have to send this information with their first letter to borrowers after either (a) the borrower is in default and the loan has been accelerated (i.e. they called the full balance due) or (b) the borrower has been in default for 12 consecutive months.

Borrowers can request the information for themselves under the law, but it only requires that the creditor, servicer, or collector provide this information in the same circumstances—after default and acceleration, or 12 consecutive months of default. (That's not to say borrowers can't ask for it anyway.) But for people in default, this is a powerful tool to hold companies accountable for trying to collect on debts without the right to do so.

Lawsuits and Settlements

Along with the written information above, the new law has some protections for people who are sued or enter into settlements on their private student loans. Specifically, the new law requires:

How do borrowers use the law?

First, anyone can make a request for information as explained above. The law requires that they give it to borrowers who have been accelerated, or have been in default for at least 12 months. Even if a borrower hasn't been in default, there are other laws that allow them to request information from their loan servicer. Jubilee Legal has prepared a template letter that anyone can download, fill in, and send here. (If you send the letter via certified mail, you will have a tracking number and proof of when it was received.)

Second, this new law provides that if a lender, servicer, or collector violates it, they may have to pay attorney fees. This is called "fee shifting," and it allows legal practices like Jubilee Legal to help clients exercise their rights without having to pay anything themselves. 

If you have questions about your private student debt, or about your rights under this law, you can contact Jubilee Legal for a free consultation. Click on the "Contact" button or call 805.946.0386.