Statute of Limitations for Federal & Private Student Loans

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READER QUESTION

What is the statute of limitations for student loans?

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Bills.com Resident Expert
Dec 20, 2011
HIGHLIGHTS
  • Federal student loans have not statute of limitations.
  • Private student loans are subject to state statutes of limitations.
BILL'S ANSWER

Thank you for your question about statute of limitations on student loans.

You did not specify whether your loans are federal student loans or private student loans. This distinction is huge, as the statute of limitations for federal student loans and for private student loans are not the same.

Federal Student Loans

The bad news: Due to changes in federal laws in 1998 and 2005, collection on federal student loans now have no statute of limitation and — with very limited exceptions — can no longer be erased though bankruptcy.

The good news: There are many, often flexible, options available for student loan resolution. Depending on the specifics of the situation, student loan borrowers may be eligible for programs that offer extended repayment periods, modifications that are income-sensitive (income based repayment or income contingent repayment, or graduated (starting small and rise over time). Some plans also offer possibility of “rehabilitating” a defaulted loan, so that some or all negative information about the loan is expunged from the borrower’s credit report if certain criteria are met.

Several federal and state agencies offer programs to help you cancel or reduce all or a portion of your student loan debt. Student loan forgiveness programs involve you making and honoring a long term commitment to teaching, nursing, or military service. To learn about some of the specific forgiveness programs available and how you can apply, visit the Federal Student Aid Web site.

Private Student Loans

Private student loans have entirely different rules for statutes of limitations. Unlike federal student loans, private student loans are subject to state’s statute of limitations for taking legal action to collect on written contracts. Once the statute of limitations expires, you can raise the statute of limitations as a defense, if the creditor attempts to take legal action to collect on the debt. However, just because the statute of limitations passes does not mean that a creditor or collection agent cannot try to collect on the debt. If you make a payment on a debt whose statute of limitations has passed, you can bring an expired debt back to life.

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The statutes of limitations start running 30 days after your last payment on the debt. If you think that the statute of limitations for a private student loan debt is about to expire, I encourage you to consult with an attorney in your area to discuss the implications of an expired statute, and what actions you need to avoid to prevent the statute of limitations from being tolled or restarted.

The statute of limitations for a written contract no longer apply if the creditor or collection agency sues you, before the statute of limitations expires, and obtains a judgment against you. If that happens, you will be subject to wage garnishments, bank levies, and liens.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (47)


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Brownie M.
San Antonio, TX  |  December 20, 2011
Can the government or collection designee take money from a 401K to collect defaulted student loans?
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Bills.com
December 21, 2011
I am unable to find any authority given to the Dept. of Education or state guaranty agencies under US Code Title 20, Chapter 28, Subchapter IV, Part F to levy retirement or pension accounts. However, the Dept. of Education and state guaranty agencies have the authority to file an action (a lawsuit in court) against a delinquent borrower. This relatively rare event would occur if the Dept. of Education had evidence of fraud, embezzlement, or other crime involving a student loan.
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Ron S.
Oklahoma City, OK  |  October 27, 2011
Bill what is the statute of limitations on a student loan in 1988 and does the 1998 law retro back or is it for that year and up to current?
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Bills.com
November 01, 2011
From my research it appears that there is no statute of limitations on federal loans, even those that originated before the 1998 law. If you feel that you don't owe the money or wish to receive an answer from someone who is licensed to dispense legal advice about the statute of limitations for your very old student loans, then you should speak to an attorney.
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Beenthere I.
October 22, 2011
In dealing with FMS - No one there talks to the others Totally. If the notes don't get in the computer... by their mistake - IT'S YOUR FAULT and you still have to Prove What You Are Complaining About.
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MJ W.
Culver City, CA  |  October 08, 2011
I got a student loan in 1991. I no longer see it on my credit report but I got a wage garnishment threat from goldsmith and hull. The loan was $2000 now I owe $5000. Can this really happen? It says my name VS United States. Please help.
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Bills.com
October 09, 2011
Just because a debt does not appear on your credit report it does not mean that you no longer have financial responsibility to pay it. Speak with an attorney to see if you have any grounds for stopping the wage garnishment.
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Edith G.
August 17, 2011
Recently, I received a relative's bill from a collection agency. The difference between the original amt. and the interest accrued is nearly 1300 dollars. There was no communication from the college about this debt (which supposedly was from over twenty years ago) even though we have had solicitations for donations. What can we do? Does the statute of limitations stand for a federal student loan if it had already passed by the time these laws were put into place?
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Bills.com
August 18, 2011
In my experience, college alumni associations are the most adept people-finding organizations on the planet. The same cannot be said for college's accounts receivable offices. It would make sense for them to combine forces, but that does not seem to happen, as your anecdote illustrates.

Is the debt related to a federal student loan? Private loan? An unpaid housing or lab fee? If, as you mentioned, this relates to a federal student loan, there is no statute of limitations on federal student loans. Were you a co-signor on the loan? If so, then you have liability for the debt. If you were not a co-signer, you have no liability.
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Renee P.
Murfreesboro, TN  |  July 25, 2011
I have a student loan that was in deferment because I lost my job in 2009, and it recently came out of deferment in Feb 2010. Here is the catch, Sallie Mae did not contact me in any way to let me know that I had reached the end of my deferment, and when I spoke to them today I was given dates when emails and letters were sent out. I have lived at the same address for the past 3 years, and have never received any letters or emails from them saying my deferment was up. They sold my account to another company in April of this year, and the new company has not contacted me one time about the debt,and in May they put it on my credit report as being in default. I happened to pull my credit report today and saw it. Since it has come out of default in Feb 10 until now my debt has went from 18,000 to 27,000. If I had known it was out of deferment I would have made arrangements for payments. Is there anything I can do?
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Bills.com
July 26, 2011
I am unable to tell you whether or not you had a responsibility to know the status of your loan, regardless of whether or not you received the communications from the lender.

You can speak to a lawyer, to see if the lack of timely communication gives you any grounds to challenge the $9,000 increase.
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Rosalie H.
New York, NY  |  July 30, 2011
Hello, I live in California and back in 1986 I visited a vocational school for information - I signed a few documents that they said they would submit to see if I qualified for a student loan. I told them I was 17 and that I would need to talk to my mom before the actual paperwork was signed and they agreed. I guess the loan went through as I was contacted today regarding it. Can you tell me if the government can go pursue someone who did not attend the school and who was under age at the time the docs were signed?
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Bills.com
August 01, 2011
Consult with a lawyer who has consumer law experience to learn what, if any, liability you have for the loan. First, most courts will not enforce a contract signed by a minor. However, an exception was created for student loans at some point relatively recently, and the lawyer you meet will research this further. Second, applying for a loan and accepting the funds are two different things. You do not state whether you attended the school or accepted the funds, so it is unclear to me if you have any liability whatsoever. Third, you do not state whether the loan was private or federal, and different collection rules apply for each. Finally, I urge you to, in addition to consulting with a lawyer, validate the debt immediately.
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Chuck C.
Belding, MI  |  July 22, 2011
hey bill i took out a student loan for vocational training at Superior training for heavy equipment operation back in 1987 and am just now being told i owe 5 times the origanal amount due to late fees and interest.i don't know if this is a federal loan or private loan.how can i find out.and bye the way i have never paid a penny on this loan due to the school being a scam but can they take my tax refund anyways? i appreciate your your response,gypsy..
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Bills.com
July 22, 2011
Consult with a lawyer in your state who has consumer law experience. He or she will review your loan documents to help you learn if your loan is federal or private, and if the set-off on the tax return is appropriate under the circumstances.
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Matt M.
Phoenix, AZ  |  June 10, 2011
My wife had a student loan that she put into chapter 13 in 1993 and was discharged in 1997. She inadvertantly opened a can of worms with the school when she requested a transcript. Now they are demanding repayment and are threatening her with a lawsuit. If this was discharged in 1997, does she owe anything on the loan? It was accepted into her chap 13 bankruptcy and they are claiming it does not matter. Please help!
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Bills.com
June 10, 2011
If the discharge occurred before the bankruptcy rules changes that all but outlawed the discharge of student loans, then the school has no leg to stand on and is in violation of federal law, in my opinion. Consult with a bankruptcy lawyer, and be prepared to sue your spouse's alma mater.
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