It’s been over a year since Hannah Bates, 31, was sued by her private student-loan lender — a legal battle she called lengthy, expensive, and confusing.
It started in October 2024, when Sallie Mae notified her that she’d made the final payment on her outstanding balance of $55,000. Bates knew that was a mistake. In fact, she was falling behind on her $1,500 monthly payments and had years’ worth left. When she tried to clarify with Sallie Mae, she said she received conflicting information on how to avoid default. Six months later, Sallie Mae sued her to collect.
When she’s not working her 12-hour nursing shifts, Bates has represented herself in the lawsuit, with the help of ChatGPT. She said it’s taken a significant emotional and financial toll, and after multiple unsuccessful attempts to reach a payment agreement, the court ordered that her wages be garnished.
She lost $884 from her roughly $2,700 paycheck for two pay cycles, prompting her to pick up extra shifts at her hospital.
“It’s the weight of the world,” Bates said. “Some days are better than others, but I didn’t think I’d be here.”
More student-loan borrowers could soon find themselves in Bates’ situation. Private student loans comprised only 10% of the $1.85 trillion student-loan market in 2025, according to Consumer Financial Protection Bureau Data. But President Donald Trump’s repayment overhaul, which took effect July 1, is expected to drive more borrowers to private lenders like Sallie Mae, which lack substantial federal oversight.
Business Insider’s previous reporting revealed widespread confusion in lender communication as borrowers moved toward default and litigation — about one in four complaints filed with the CFPB in 2025 were about private student loans.
A report from advocacy group Protect Borrowers said that private lenders sued more than 100,000 borrowers between 2012 and 2016. Bates said that her legal process taught her that she’s “very much not alone.”
“At first, I was really embarrassed and ashamed to talk about it,” Bates said. “Now I’m absolutely not.”
This story is part of Business Insider’s “Student Debt Spiral” series, which explores how rising student debt is changing the financial futures of millions. Do you have a story to share? Fill out this form, and we’ll be in touch. Read more of our student-loan coverage here:
What came after the lawsuit
Before defaulting, Bates was paying what she could afford — around $560 a month — but was unable to make her full $1,500 payments. She tried and failed repeatedly to negotiate a lower monthly bill, and didn’t know how to return to good standing after she defaulted.
“I didn’t hear anything for months,” Bates said. “I had contacted them once or twice throughout this process, waiting to hear back, and no one ever had an answer for me.”
A Sallie Mae spokesperson previously told Business Insider that it could not comment on Bates’ account and that the company “proactively and consistently” communicates with its customers, including sending notices when a customer defaults, when that defaulted loan is sold, and informing them of the new owner.
After Bates was sued, the judge encouraged her instead to reach a settlement or agree to a payment plan with Sallie Mae. Bates said Sallie Mae offered her a payment plan of around $1,600 a month — higher than the original payments that had led her to default in the first place.
“That’s not feasible,” she said after the hearing. “I am more than willing to pay back what I took, but it needs to be a payment that is manageable, and that’s not going to put me on the streets.”
Ayelet Sheffey covers all things student debt, from the latest Education Department news to stories of borrowers navigating their loans. To stay up to date on her coverage, sign up to get email alerts for her new stories here.
She requested a lower payment plan and waited months for Sallie Mae’s sign-off. She saw in August that a garnishment notice had been added to her court docket. Weeks later, she lost a chunk of her paycheck.
“It’s hard going to work knowing that with everything you deal with and go through, you’re not getting paid the way that you ultimately deserve,” Bates said.
At the end of September, a judge signed off on a plan allowing her to make $600 monthly payments toward her balance until it is paid off. It won’t be easy, she said, but it’s preferable to losing about $1,700 a month to wage garnishment.
“Home-wise, with bills and finances, it’s not 100% feasible,” Bates said. “But it’s given me some sort of empowerment because at least I have the ball back in my court, and the money won’t just be taken from me.”
Bates will begin making payments through the court’s payment system on November 1. Looking back, she wishes she had better understood how lengthy litigation can be, so she could have better prepared herself for the legal battle ahead. While she still has years of payments to go, she’s relieved to close this chapter.
“I’m optimistic,” Bates said. “I feel a lot better mentally because it’s not consuming my life as much as it was.”
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