Understanding The Statute Of Limitations On Student Loan Collections – There is no statute of limitations on federal student loans. Private student loans have statutes of limitations, the length of which varies from state to state.
When collecting a debt, the statute of limitations refers to how long a creditor has to sue for repayment. If the statute of limitations expires, a creditor can’t sue you — but that doesn’t mean your student loans disappear. The debt holder may still be able to collect on that debt, although it cannot use the court system to do so.
Understanding The Statute Of Limitations On Student Loan Collections
Don’t put off paying off debt while waiting for legislation to pass. Before that you will be in student loan default, and there is no guarantee that you will not be sued. But if default has already occurred, understanding the limitations of loan terms can save you in court and from debt collectors.
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For loans with written contracts, the statute of limitations ranges from three to 10 years, depending on the state. A six-year statute of limitations is the most common statute for loans such as private student loans, with 22 states using this term, according to the nonprofit In Charge Debt Solutions.
Generally, your loans are subject to the statute of limitations for the state in which you live. But if you are sued, the court may use a different law based on where the lawsuit was filed or the language in your loan paperwork.
If you are sued and are not sure which law applies, hiring an attorney can help. While you will likely have to pay for the services of an attorney, an attorney who specializes in student loans should be able to determine if your statute of limitations has expired and if you have a lawsuit. has a case to dismiss.
If a creditor doesn’t know the statute of limitations has expired, it could take you to court — don’t ignore a summons about your debt. You can present the defense that your student loans should be considered “time-barred” or no longer collectable based on the statute of limitations.
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Even if the court agrees with you, depending on your state’s laws, your creditor may still be able to contact you about the debt. But it won’t have access to collection tactics that could enable a court judgment, such as garnishing your wages or placing a lien on property you own.
A creditor also cannot take these actions or threaten you with a lawsuit. All of its collection efforts must comply with the Fair Debt Collection Practices Act (FDCPA). This includes giving an honest answer if you ask if the statute of limitations has expired.
In contrast, federal student loan holders can collect defaulted loans through wage and tax refund garnishments without a court order, making the statute of limitations for these loans unnecessary. Opting them out by default is the best way to prevent collection actions.
It is possible to restart the statute of limitations on student loans. Like the laws themselves, actions that vary on a state-by-state basis can include:
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You can stop, or even “toll,” your debt by doing things like moving abroad or filing for bankruptcy.
The FDCPA prohibits debt collectors from using practices that trick you into triggering the statute of limitations. If you feel this has happened, contact an attorney and file a formal complaint with the Federal Trade Commission. If you have a private student loan, you may be eligible for student loan relief now without filing for bankruptcy: Student Loan Protection for Repayment .
Unlike federal student loans, private student loans provide additional defenses to repayment and non-bankruptcy options that can be useful in challenging loans and potentially defending against private lender collection efforts. We refer to these non-bankruptcy options as student loan protection for repayment.
Most of these defenses require the correct set of facts and circumstances, so they are used less frequently than the bankruptcy options available to private student loan borrowers. However, our experienced student loan defense attorneys can ensure that every student loan defense available to private student loan borrowers is examined and used when appropriate.
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Sometimes, the best way to deal with student loan debt is to file for bankruptcy. If your student loans are dischargeable in bankruptcy, this may give you the best outcome. On the other hand, sometimes bankruptcy isn’t necessary or in your best interest. In that case, we will consider student loan protection for repayment.
Student loan protection can take many forms. For example, if you have very little consumer debt and/or less than $50,000 in private student loan debt, we may be able to discharge your student loan debt without filing for bankruptcy.
Other times, we react to the loan company’s collection efforts. If you default on your student loan, you may be sued by your student loan lender. In this case, we may be able to look at several different legal defenses. In other words, our student loan defense for repayment may be based on a technical legal issue. This could be a defective assignment, an expired statute of limitations, childhood issues, or other legal arguments.
Private student loans typically change hands several times over the life of the loan, meaning that there will be different lenders who will own your student loan over the years of the loan. This presents a problem for private lenders who own the loan. The lender has to prove that they own your personal student loan debt and, therefore, can collect on your debt.
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This challenge essentially requires the private lender to show, such as a contractual agreement, how they came to own your student loan. If your personal student loan has changed lenders ten times, the lender will need to show proof of each of these transactions to support its ownership of your loan. There may be times, especially in cases of multiple transactions, where at least one transaction along the way will have no documentation or the documents have been lost or misplaced.
If a private lender cannot prove that they own your student loan debt, it will be very difficult for them to legally collect said debt.
Another defense to a private lender’s collection efforts on your personal student loan debt is the statute of limitations, which is generally found in every state. This statute specifies the maximum time after default on a loan in which a private creditor may bring suit to collect the debt. For example, the statute of limitations on collecting private student loan debt in this type of situation in Pennsylvania is 4 years.
This defense is most relevant when a private creditor seeks to collect through a lawsuit filed in state court. Additionally, this defense has been eliminated for federal student loans.
Student Loan Statute Of Limitations Timelines (by State)
Childhood protection is another potential student loan defense for your personal student loan repayments. Private student loans require that the borrower has reached an age of majority when he enters into the loan agreement. A minor does not have the legal capacity to enter into a contract; Therefore, if a borrower was a minor at the time private student loans were contracted, said student loans may not be enforceable. In Pennsylvania, the age of majority is 18.
Another student loan defense for the repayment of private student loans is the defense of laches. This defense may reflect or even be limited by the statute of limitations argument. The defense of laches pertains to an unreasonable and injurious delay in a private lender seeking payment for private student loan debt. As a result, Laches’ defense argues that the delay could make possible private student loan recovery unenforceable. Laches is a little used defense, but in the right circumstances, it can be effective.
Yes! There are cases in which a private lender may be offered a demand and settlement offer that asserts arguments that would be made in bankruptcy for a private student loan discharge. In some cases, private lenders are willing to come to an agreement with private student loan borrowers outside of bankruptcy that prevents them from arguing their case in an adversary proceeding.
We will usually suggest this course of action where bankruptcy does not make sense for you. For example, someone with very little consumer debt and/or less than $50,000 in private student loans may be a good candidate for a settlement offer without filing for bankruptcy.
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However in most cases, this is only an option for private loans. If you have federal loans, you may want to consider student loan forgiveness or an administrative discharge of student loans.
Our top student loan attorneys have extensive experience negotiating with private lenders to settle private student loan debt for a fraction of the total loan amount.
Bankruptcy is not the only option for challenging a personal student loan debt or a private lender’s ability to collect on a personal student loan debt. There are several rescue and non-bankruptcy options available to private student loan borrowers. These options require a specific set of facts and
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