student loan debt, Student Loans

Do Student Loans Have a Statute of Limitations?

When it comes to most debts, any time the individual who owes the debt stops making payments, the debt will then go into collections. At that point, the original creditor can make the decision to sue the person owing the debt for the remaining balance. However, the creditor only has so long to file that lawsuit. Like any other cause of action, a statute of limitations places restrictions on how long the creditor has to pursue collection of what is owed.  

Each state has its own statutes of limitations, but when it comes to federal student loan debt, federal law governs how this debt is collected. Federal student loans are not governed by the same rules as most consumer debts. In fact, federal student loans do not have a statute of limitations at all, no matter how old they may be.  

These debts are handled similarly to unpaid child support. No matter how long it has been since the debtor has missed a payment, the federal loan servicer has the legal right to pursue collection on the remaining balance owed. This collection can be done several ways, including garnishment of the borrower’s wages and seizure of the borrower’s tax refund.  

Another unique aspect to federal student loan debt is federal loan servicers are not required to sue the borrower first to be able to garnish wages or seize the borrower’s tax refunds. A court order can be issued without them ever formally suing the borrower. 

Borrowers who rely on Social Security for income should also be aware of the fact that federal loan providers are authorized to take part of the borrower’s Social Security check. However, they are limited as to how much they can take.   

If a borrower is struggling with payments, federal student loan servicers offer different rehabilitation programs for borrowers who wish to resume making payments and avoid wage garnishment or other penalties.  

Private student loans are handled differently than federal student loans. Unlike their federal counterparts, private student loans have a statute of limitations, which can range from three to 20 years, depending on the state. It should never be assumed that the loan is governed by the state where the borrower lived at the time the loan was taken. It can often be governed by the state where the borrower originally took out the loan or the state specified within the actual contract itself. Many loan contracts will include a provision that states that a judge will determine which state’s statute of limitations will govern. It is important that the borrower read the fine print on his or her private loan application to see what state’s laws apply. Just because a borrower lives in Florida does not mean that his or her private student loan is controlled by Florida law.  

The official date when the statute of limitations begins running is also determined by the governing state. Some states use the date of default as the triggering event to begin tolling the statute of limitations, while others use the date of the most recent payment.  

If the borrower owes on a private student loan that is past the applicable state’s statute of limitations, it is important that he or she not do anything regarding the account to avoid reviving the debt. Many times, third-party debt collectors will make statements in hopes that the borrower does not know that the debt is past the statute of limitations. Their goal is to have the borrower say or do something that will revive the expired debt, allowing the collector to resume collection of the amount owed.  When in doubt, contact a bankruptcy attorney if the borrower has concerns regarding his or her rights and obligations to pay the debt.  

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For borrowers who are struggling with student loan debt, relief options are available.  Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt.  It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com. 

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