A Spike in Student Loan Defaults Likely to Trigger Follow-on Litigation Surge

The student lending industry should pay close attention to the onslaught of litigation that mortgage loan servicers have faced for years. I recently authored an article on this topic for Law360. A Consumer Federation of America analysis has indicated that student loan defaults have risen at least 14 percent since 2015. Such a trend will likely make student lending market participants susceptible to increased regulatory scrutiny, and could also result in a spike in follow-on private litigation.

Student loan lenders will be well advised to evaluate their policies and practices in light of this situation. Here are some steps they should consider: 

• Check for compliance with Equal Opportunity Act, and related federal and state laws
• Audit underwriting systems
• Self-monitor trends in borrower behavior
• Implement consumer complaint systems
• Check loss mitigation patterns