What is the statute of limitations for student loans?
A statute of limitations is a legal deadline that creditors and debt collectors must meet when trying to collect a debt. If you have defaulted on your student loan debt, it may be subject to a statute of limitations. However, the exact timeframe depends on the type of debt and your state of residence.
What is the statute of limitations for student debt?
The debt collection statute of limitations governs how long a creditor can sue you in an attempt to collect an unpaid debt. For contractual debts like student loans, states generally limit the period for debt collection to between three and 10 years.
Once the statute of limitations on a debt has expired, the debt is considered “time barred”. But a prescribed debt is not the same as a debt forgiveness. An expired statute of limitations prohibits a creditor or collection agency from suing you, but you may continue to receive collection calls and letters, and the account may still appear on your credit reports.
Student loans with statute of limitations
Federal student loans have no time limit, so lenders and collection agencies have no time limit when it comes to legally forcing you to pay (i.e. suing you in justice). Whether you’ve been in default on a student loan for a year or 20 years, the loan holder could legally use the court system to force you to pay if they wanted to.
Private student loans, on the other hand, have a statute of limitations ranging from three to 10 years. After that, they become prescribed. The exact timeframe depends on your state of residence.
If you’re trying to determine if your student loan statute of limitations has expired, you can consult your state’s guidelines or contact your state attorney general.
How long is the statute of limitations for student loans for credit reports?
Federal law also limits how long most types of negative information can stay on your credit report. In most cases, the Fair Credit Reporting Act (FCRA) allows non-conforming items like past due debts or collection accounts to stay on your credit report for up to seven years.
Because federal student loans do not have a statute of limitations, these negative accounts can remain on your credit report indefinitely. Only after you’ve paid off your federal student loans can the default be removed from your credit reports – and even then, it will take another seven years from the time of repayment for those accounts to be removed. .
Can student loans ever be canceled?
While many types of debt can be discharged through bankruptcy, student loans are much more difficult to clear. To get them released, you will need to prove to the court that repaying the loans would cause you undue financial hardship. This could mean demonstrating that:
- You are not able to maintain a minimum standard of living if you have to repay the loan.
- Paying off the loan would require you to remain in financial difficulty for a significant portion of the loan repayment schedule.
- You have already tried in good faith to repay the loan before declaring bankruptcy.
If you can convince the court that paying off your student loan would cause you undue financial hardship, the court may choose to pay off your debt. However, the bankruptcy court may also decide to release only a portion of your debt or adjust your loan repayment terms instead.
Private student loans can be a little easier to include in a bankruptcy filing than federal student loans. A recent New York Court of Appeals ruling found that private student loans are not protected against discharge from bankruptcy, which may encourage more borrowers to pursue this option. Some lawmakers are also working to introduce an easier path to bankruptcy for federal student loans, allowing federal loans to be discharged after a 10-year waiting period.
The bottom line
The consequences of non-payment of student loans can make your financial life difficult in several ways. These negative accounts can damage your credit history and credit score, making it difficult to qualify for new financing until you resolve the situation. Defaulting federal student loans also don’t have a statute of limitations for debt collection, and you may not be able to pay off those debts in bankruptcy.
If you are struggling with overdue federal student debt, you might want to consider whether rehabilitating or consolidating your student loans could be of benefit to you. With delinquent private student loans or federal loans where consolidation or rehabilitation is not an option, it may be helpful to speak to a student loan lawyer or an organization that offers loan assistance. student loans for personalized advice.