A recent New York Times article details the struggles of a student loan creditor in collecting defaulted student loans. The article compares the situation to the subprime mortgage debacle where paperwork was lost and therefore the debt lawsuits couldn't be proven.
In one instance, a $31,000 debt was wiped out by a judge when paperwork showing the debt couldn't be presented. In another instance, an $11,000 debt was dismissed. The article reports that there may be upwards of $5 billion total value in these troubled loans.
Nonetheless, "The trusts win many of the lawsuits they file automatically, because borrowers often do not show up to fight."
People often are embarrassed or too despondent to respond to lawsuits. But as this situation shows, it's important to respond to lawsuits!