If you owe money on student loans and are in default, ignoring the debt is rarely the best course of action. Federal student loan default can result in income garnishment, tax refund garnishment, and even garnishment of social security benefits. They are persistent, and they do not go away when you ignore them.

Private student loans, on the other hand, may be subject to a statute of limitations on their ability to be collected. It is possible for debts to become “uncollectible” after several years of nonpayment. As a result, debt collectors will no longer be able to sue or pursue legal action to collect the debt.

It’s important to understand the regulations that govern the statute of limitations for student loan debt and how they relate to your situation if you have outstanding debts from your undergraduate or graduate education.

What Is a Statute of Limitations on Debt and How Does It Work?

The statute of limitations on debt refers to the period of time that a creditor has to sue you if you are in default on your debt. Once the statute of limitations has expired, the creditor will be unable to use the legal system to compel you to pay back the money owed to them.

Of However, even if the statute of limitations has expired, you are still liable for the debt you incurred. Creditors, on the other hand, lose all of their “teeth” after the statute of limitations has expired.

As soon as a debt becomes “time-barred” (meaning that the statute of limitations has expired), the creditor will be unable to sue you or use the legal system to collect payment from you. Any subsequent requests for money will be met with a lot of bark and little bite.

Student Loan Debt Is Subject To A Statutory Limitation

So, do you have a statute of limitations on your student debt? If so, what is it? It will be strongly influenced by the type of student loans that you have taken out. Below, you’ll find that the answer for federal student loan borrowers is vastly different from the response for individuals with private student loan debt.

Student Loans from the Federal Government

Unfortunatelly, federal student loans are not subject to any kind of limitation period. If you fail to make payments on your student loan debt, your student loan servicer has the right to sue you (and garnish your wages). Student loan debt incurred through the federal government never expires.

In the event that a borrower defaults on a student loan, their income may be garnished and their tax refunds withdrawn from their accounts. Borrowers’ Social Security benefits may even be garnished if they fail to pay their debts (which can be a huge problem for parents or grandparents who signed a Parent PLUS loan).

As previously stated, neglecting federal student debts will not make them disappear. In order to get rid of your federal student loans that have gone into default, you’ll need to devise a strategy to bring them back into good standing.

Student Loans from Private Sources

Private student loans, in contrast to federal student loans, are subject to a statute of limitations. It varies from state to state how long it takes for a debt to become time-barred. Some jurisdictions impose limitations as little as three years, while others allow debt to remain “active” for up to twenty years after it has been incurred (looking at you Maryland…). The most frequently used timeframe is six years.

If you have private student loans that are past due and believe they may be time-barred, you should see a bankruptcy or consumer advocacy attorney in your state for advice. A lawyer can assist you in determining whether or not your private student loan debt has expired the statute of limitations period. They can also assist you if you are facing a lawsuit for a debt that has passed the statute of limitations.

Additionally, exercise caution while “resetting the clock.” If you make a payment or take any other action, you could be restarting the clock on your debt repayment plan, according to experts. Again, consult with an attorney licensed in your state.

Here’s a breakdown of the student loan debt statute of limitations per state, broken down by county and state. Please keep in mind that different types of debt may be subject to varying restrictions.

Keep an eye out for zombie debt!

It is still possible for creditors to approach you even if the statute of limitations on student loan debt has expired. Do not commit to make payments on the loan, no matter what you do. If you make a payment on a time-barred student loan, the loan can become “zombie debt” (i.e., dead debt that is brought back to life). Suddenly, the debt collector will have legal authority to pursue the debt once more.

Rather than making a payment, you should request a debt verification letter instead. Name of original creditor, initial amount owing, and name of current collector should all be included in this letter. This information can assist you in determining whether the debt is as old as you believe it to be.

Using the services of a lawyer may be beneficial if you’re having difficulty understanding a collection agent. The American Bar Association’s Find Legal Aid tool, which is available online, or the National Association of Consumer Advocates (NACA), which comprises lawyers who specialize in consumer protection, are also good places to start your search.

What to Do If You Have Student Loans That Are Currently Defaulted.

If you have obligations that have gone into default, you’ll need to devise a strategy for getting the loans out of default and out of your life. Also true in the case of unpaid student loan loans for which there is no statute of limitations in your state or country. A few actions that are recommended are as follows:

Respond to any and all lawsuits filed against you.

Whether you owe money to the government or to a private company, it is vital that you respond to any action brought against you. Even if you believe the statute of limitations on the debt has expired, you are required to respond to the lawsuit.

It is possible that a court will not recognize that the obligation has expired and will find in favor of your creditor. In the event that a judge determines in the creditor’s favor, the debt becomes recoverable. You have the option of representing yourself in court or retaining the services of an attorney who will advocate on your behalf.

Immediately notify the collector that you will not be making payments on any private loans that you feel have passed the statute of limitations on student loan debt. Then take the actions outlined below:

Make no partial payments on debt that has passed the statute of limitations. Don’t commit to pay off the debt in installments. If paying the obligation is important to you for moral grounds, you should postpone paying the loan until you are able to pay the bill in full. Engage the services of an attorney to assist you in putting together a settlement plan that will prevent the creditor from suing you later for unpaid interest and fees.
Send a cease and desist letter to your creditors. Once you have notified the creditor that the debt is no longer valid, you should send them a cease and desist letter via certified mail to discontinue the relationship. After receiving this letter, they should not contact you again unless to acknowledge receipt of the letter or to advise you of any legal action that has been taken against you.

Consider the Option of Resolving Private Debt in Default.

Consider a settlement option if you have private student loans that are in default and have not yet been discharged by the court. An agreement to settle a debt involves the borrower agreeing to pay a specific amount of money (often less than the total amount owing) in exchange for the creditor agreeing to forgo the right to litigate for additional funds.

Given the fact that settlements are legally binding agreements, it is normally better to retain the services of a bankruptcy attorney or a settlement attorney to guide you through the process.

Remove yourself from default on your federal student loans.
It’s important to remember that federal student loans are not subject to the statute of limitations on student loan debt. Furthermore, in order to be eligible for the majority of student loan forgiveness programs, you must be current on your loan payments.

In light of these considerations, you’ll want to take efforts to get your federal student loans out of default as soon as feasible. To their advantage, all Direct federal student loan borrowers are eligible to participate in Income-Driven Repayment (IDR) schemes. Depending on your income level, you may be eligible for lower monthly payments to assist you in getting out of default and back on track with your finances.