If you have student loans and are worried about being able to pay them, you may be wondering, what is the statute of limitations on student loans?
The statute of limitations is the period during which you could be sued for unpaid educational loans (or any other kind of debt). Once the statute of limitations has expired, no lawsuit can be brought against you to try to recover unpaid funds — although lenders can pursue other collection activities.
So, how long is the student loan statute of limitations, and what does this mean for you? This guide will explain all you need to know.
What is the Student Loan Statute of Limitations for Federal Student Loans?
Federal student loans are issued by the Department of Education. There are special rules for these government loans. Unlike other types of debt, there actually is no statute of limitations for federal student loans.
Because there isn’t a federal student loan statute of limitations, the government can always try to collect these loans. There is no amount of time that could pass that would free you of your obligation to repay your debt. And the government could take a wide variety of collections activities to collect what you owe, including garnishing your wages or seizing your tax return or certain government benefits.
There is also no statute of limitations for negative information about your federal student loans on your credit report. While the Fair Credit Reporting Act typically requires information about defaulted loans to be deleted from your credit report after seven years, defaulted federal student loans can remain on your credit report as long as the account is delinquent.
This means the default could continue to damage your credit score the entire time you have unpaid federal loans. Only after you pay off the defaulted educational debt and seven years have passed would this information finally come off your credit record.
What is the Student Loan Statute of Limitations for Private Student Loans?
Private loans are subject to different rules than federal student loans. These loans are issued by private lenders, such as banks and credit unions, rather than the government. And there is a statute of limitations for lawsuits for private loans.
The specific statute of limitations varies by state, but it is generally between three and seven years, depending on location. In most cases, the statute of limitations on student loan debt from private lenders is determined based on where you live. However, your loan contract may specify some other rules. For example, the contract may specify the student loan statute of limitations is based on where you resided when you borrowed the money.
You can review the promissory agreement for your loans to find out exactly what rule applies to you. Once you have discovered which state’s rules apply, you can check that state’s laws. There are several helpful online tables detailing the statute of limitations for debt collection across the U.S. that you can refer to.
What happens if the statute of limitations on student loans has expired?
If the statute of limitations on private student loans has expired, lenders are no longer able to sue you to try to collect the money. If a lender attempted to pursue a lawsuit, you could ask to have the claim against you dismissed because it is time-barred.
It is important to be aware that sometimes paying a payment can restart the statute of limitations on student loans. If you are behind on your private student loans and are considering resuming payments, you should talk with a lawyer about how this could affect your future obligations.
It’s also essential to know that while lenders cannot successfully sue once the statute of limitations on student loan debt has expired, they can still try to collect in other ways, such as making collections calls to you.
Should You Wait for the Statute of Limitations on Student Loans to Run Out?
While it may be tempting to just not pay your debt and let the statute of limitations on student loans run out — especially if you owe a lot of money and are struggling — this is not a good approach to dealing with payment problems.
Since there is no student loan statute of limitations for federal student aid, you would not be able to avoid paying back federal loans with this approach. And if you stop paying private student loans for multiple years until the time limit for legal action runs out, you would have your credit destroyed, and you risk being sued and subject to other collections activities.
If you cannot pay your student debt, it is better to explore other options. While it is difficult to get student loans discharged in bankruptcy, it is possible in certain situations when being forced to pay them would cause undue hardship.
You can also explore different ways to reduce your monthly payment so it becomes more affordable. Some options include selecting an income-driven payment plan for federal student loans or pausing payments on either federal or private loans through forbearance or deferment (if you are eligible based on lender rules and your financial situation).
Refinancing private student loans could also be an option as well, although you would want to act while the loans are in good standing. Refinancing would mean getting a new loan to pay off existing debt. If you qualified for a new loan with a lower rate, longer payoff time, or both, your payments could become less expensive.
Bottom Line
Ultimately, waiting for the student loan statute of limitations to run out is not something you should try. In fact, it’s important to try to avoid being late in payments or defaulting on student loans due to the financial damage that can result. Try to do everything you can to keep your loans current by exploring some of the options mentioned above for reducing your student loan debt costs.