Is there a Statute of Limitations for Student Loans?
There is much confusion regarding the applicability of the statute of limitations
on bringing lawsuits to collect on defaulted student loans. Part of this
confusion can be attributed to changes in federal laws that
eliminated the statute of limitations on federal student loans. As such, in order to determine if an SOL applies, it’s important
to identify whether the loan is private, or are they backed by the government
(ie. Stafford Loans, Plus Loans, Perkins Loans, etc…).
Private student loans are generally subject to the statute of limitations
for breach of a written contract (or promissory note), which in New York
is 6-years from the date of breach. However, if the Plaintiff is a debt
buyer, under New York's borrowing statute CPLR §202, the lawsuit
must be brought within both the SOL's in NY, as well as in the state
where the cause of action accrued. For the purposes of SOL, private student
loans are treated similarly to lawsuits for credit card debts and other
Higher Education Act §484A(a) absolves the limitations for the Department of Education and guaranty
agency’s to file a lawsuit on defaulted student loans regardless
of the age of the debt. Simply put, a borrower that is sued on a federal
student loan will not be able to rely on a Statute of Limitations defense.
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Federal Student Loans are unrestricted by Statute of Limitations
With the substantial costs associated with college tuition and living expenses,
some student loan borrowers are finding it nearly impossible to keep up
with their monthly payments. This forces some to forego making any payments
at all and consequently defaulting on their loan obligations.
When a loan is enforced after many years have passed, it may be difficult
for the borrower to remember the terms of the loans (i.e. interest rate),
the payments made on that loan, or whether the borrower even applied for
the student loan. It may be tough to dig up old promissory notes, bank
statements, and payment receipts, and it can be challenging to determine
whether the balance was calculated correctly. Furthermore, while a loan
is in default status for years, collection fees and compounding interest
can inflate the balance substantially.
In the United States, there are certain acts that do not have a predetermined
time limitations for prosecution. For example, murder, fraud, kidnapping,
war crimes, and treason are all unrestricted by a statute of limitations.
It defies logic that a borrower of federal student loans would be subject
to similar treatment as some of the most hardened violent criminals.
Is Statute of Limitations a valid defense to a student loan lawsuit?
After a loan enters default status, the lender may elect to bring a lawsuit.
With most debts, legal action must be brought within the applicable statute
of limitations. This provides a level of protection and fairness to ensure
that consumers are not entrapped by old debts. If the statute of limitations
has elapsed and your private student loan lender has brought a collection
lawsuit, you may be able to seek dismissal of the case in its entirety.
Unfortunately, borrowers of federal student loans do not benefit from the
statute of limitations defense.
How do I resolve an old federal student loan?
Options for resolving defaulted federal loans vary. Sometimes the Department
of Education and the guaranty agency’s are willing to forgive some
of the accrued interest and collection fees if the debtor is able to pay
the remainder within a 90-day period. These settlements are rare and are
usually reserved for individuals which are deemed nearly uncollectable.
Outside of negotiating a settlement, the borrower may be eligible to either
consolidate student loans or enter into a rehabilitation program. Upon the loans being removed from
default status, the borrower will be able to elect a repayment plan for
the duration of the loan, and will no longer be at risk of tax-offset
or administrative wage garnishment.
Lastly, borrowers should become familiar with the various programs that
allow for the discharge or forgiveness of eligible student loans. For
example, individuals that are permanently disabled, and students whose
schools have been closed prior to program completion, might be able to
eliminate their federal student loans. Similarly, workers in the public
sector and teachers may also
qualify for loan forgiveness.
If you’re unable to keep up with your minimum payment, the New York City
student loan attorneys at the Law Office of Simon Goldenberg, PLLC can help you understand your
options and take back control of your life.
Contact our lawyers at 888-301-0584 to learn your options for
student debt relief.