Statute of Limitations on student loans
Heard from collection agencies that student loans have no statute of limitations? They leave out an important part - that is only true for FEDERAL student loans.
What is a statute of limitation? It is a law passed in your state that tells creditors they have a certain number of years to sue on debt. Without statutes of limitation, you would have to keep every receipt, every bank statement and every credit card statement for your entire life. Society simply could not exist without them. A statute of limitation on a written loan usually ranges from 5 to 10 years, depending on your state. This means that 5 to 10 years after your last payment on that loan, the lender must bring suit to enforce it otherwise you have an affirmative defense should you ever be sued in court. In other words - it becomes legally unenforceable.
Then comes along the "student loan crisis" a few decades back when everyone was horrified that students were taking out billions in loans, become millionaires after college and then refusing to pay back their loans. Because of the exaggerated stories, Congress decided there should be no statute of limitations on these loans, and passed the appropriate law. Since Congress takes precedence over the state's own law, any federal student loan has no statute of limitation today.
But private student loans - loans offered by private banks and NOT federally insured - do NOT fall in this category. The collection agency will not tell you this. The lender will not tell you this. You have to find this out yourself. How can you tell if it's federal or not? Call the Department of Education and ask them. They will tell you every federally insured loan you have. Any loans they do not have in their system is a "private" loan and can become unenforceable after 5 to 10 years. And you can ask the DOE operator if statutes of limitations apply to loans not in their system - they'll tell you they do.
So why don't collection agencies tell you this? Because there are hundreds of thousands of these loans in their systems that are "private" and unenforceable. If this knowledge was available to the public, they would lose millions in commissions that would otherwise be uncollected.
I hope this helps explain that not ALL student loans have a statute of limitations. If you have other questions regarding this or need information on how you can stop harrassment on private student loans that have expired statute of limitations, please post and I'll make sure you get the information you need to stop it!
Statute of Limitations with UN-REINSURED STUDENT LOANS
According to the Student Loan Ombudsman when Federally Guaranteed Student Loans lose their insured status they in effect become private student loans and the statute of limitations presumably applies. However I am being sued by a collection agency - who ignore these facts - for such a loan. I have not been able to get any Educational agency - EdFund (formerly California Student Aid Commission), SL Ombudsman, or US Dept. of Education - to verify in any way these facts. Subsequently, the collection agency has all my promissory notes, etc. and is suing as if this loan was insured with no statute of limitations. I have no precident setting case or official documentation to prove my innocence! I'm thinking this may be a case of sanctioning the collection agency. Do you have any other ideas?
Private SLs
Hallelujah, my friend!!! I have been researching and arguing this for years but no one listens. The truth is only federally insured student loans have no SOL.
In addition to my federal loans, I have loans from The Educational Resource Institute (TERI), a private non-profit which guarantees loans for certain grad studies. My TERI loans defaulted in 1997 since they would not give me any additional forbearances and demanded an amount I could not pay. So far I have managed to keep my federal loans from defaulting but TERI has continued to hound me. I have gone thru 3 CAs and am now on my 2nd atty trying to collect. The first 2 CAs were pre-SOL so I sent a std. denial, cease and desist contact plus request to verify. They sent documents purporting to be verification but never contacted me again. Then a local atty came after me. Since by then, I was outside of my state's SOL, I ignored him. He filed suit in 2003 but was unable to serve me so he dismissed it w/o prejudice. I thought this matter was over. But in 2004, another CA contacted me re the TERI loans. I sent a letter saying they were outside the SOL plus demanding verification, and cease and desist. I didnt get anything from them.
Now in 2005, another local atty has contacted me saying he represents TERI. His letter purports to respond to the letter I sent to the last CA with alleged verification. But most importantly, he says nothing about my SOL defense. I ignore him until 3 months later he sends another letter asking for my response. I have no obligation to respond. I told the CA to drop dead and asked for DV as well as informed them SOL has expired. This atty is obviously contracted with the CA since their name is mentioned in the letter. So I have agained ignored him.
Should I respond? I already told them about the SOL. His failure to respond tells me he has no argument against me. I dont want to be sued but I can defend on the SOL argument. What is the best way to discourage this a-hole from suing? Write him back or just ignore him? Any FDCPA violations here? Any case law re private SLs and the SOL? Any info is appreciated.
A little thing called sanctions...
We cannot provide professional legal opinions to individuals. However, I can make some general personal observations based upon the scenario you have provided. If the statute of limitations (SOL) has "run" (i.e., run out) on a borrower's private student loans (i.e., not federally guaranteed), an affected borrower who articulates a refusal to comply with attempts to collect the debt is standing on solid legal ground. When I say "articulates a refusal" I mean that an affected borrower should be responsive to demands for payment, providing debt collectors (attorneys or otherwise) with a clear statement of the grounds for the refusal. It is always best in legal matters to send letters via United States Postal Service CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED. That provides a borrower (or alleged borrower, as the case may be) with legal proof that the collector received the borrower's letter. Borrowers that have sent multiple letters to various debt collectors can then provide a court with proof of all attempts to collect a debt that may be barred by a SOL that has run.
A method by borrowers that has proven effective in the past is for a borrower's attorney to send the collection attorney a letter clarifying the grounds for refusal to pay a debt upon which a SOL has run, and demanding that the collector provide a sound argument supporting a belief that the SOL has NOT run. Debt collectors who are attorneys do run the risk of courts imposing sanctions against them for engaging in various types of eggregious conduct. Check out FDCPA threat leads to sanctions (RIGHT click mouse and "Open in New Window") in the Wisconsin Law Journal. It involves Fair Debt Collection Practices Act (FDCPA) issues, and resulted in an attorney being subjected to sanctions by the 7th U.S. Circuit Court of Appeals. Also FindLaw provides an excellent overview of the FDCPA from a debtor's perspective.
At the risk of sounding repetitious, we need to inform you that we cannot provide you with any legal advice or professional legal opinion regarding the issues you have raised. We do not have a full understanding of the circumstances in your case based upon your posts, and we certainly do not wish to violate any state laws prohibiting the unlicensed practice of law by providing legal advice to individuals in a manner that crosses state lines.
By the way, whenever we provide a disclaimer regarding the fact that we cannot provide professional legal opinions to individuals it is NOT meant to criticize people for asking questions. People who are not attorneys and who have personal experience related to an individual's question risk no legal liability providing responses to posts. When an attorney provides a response, that attorney (and any organization with which that attorney may be affiliated) DOES risk legal liability on more than one basis. So forgive us our repetitions. We're just complying with the law.