Do Private Student Loans Have a Statute of Limitations?

When you default on a private student loan and can’t repay it, how long can the lender pursue you to collect the balance? What is the statute of limitations on private student loans?

We have good and bad news. The bad news is lenders can pursue you indefinitely to collect the money you owe. But there is good news. Lenders only have a certain time to file a lawsuit against you to legally enforce repayment. This period of time is called the statute of limitations.

Are you at risk of defaulting on a private student loan? Or are you a cosigner of someone who is? Here’s everything you need to know about the statute of limitations and how to protect yourself.

Do private student loans have a statute of limitations?

Yes, there are statutes of limitations for private student loans.Each state sets its own limits on how long a collector has to sue a debtor. Those limits range from three to 10 years.

Private loans are considered written contracts, so below you can see the statute of limitations for written contracts in your state.

However, note that these statutes of limitations don’t apply to federal student loans.

Next, let’s discuss what you should know about the statute of limitations.

What should you know about the statute of limitations?

If you do default on a private student loan, how can you protect yourself against collectors? Knowledge is your best weapon. Read on to learn how the statute of limitations works.

When does the statute of limitations start on private student loans?

The statute of limitations on student loans starts on the date of your last payment. However, the clock restarts if you do any of the following:

• Verbally agree that the debt is valid.
• Agree in writing that the debt is valid.
• Agree to repay the debt.
• Make a payment.

If you are speaking to collection agents, it’s best to consult with a lawyer.

Does the statute of limitations stop collection efforts?

Collectors can still try to collect the debt after the statute of limitations, but they can’t take you to court and get a judgment to force you to pay.

Does the statute of limitations apply to federal loans?

No, the statute of limitations does not apply to federal loans. The federal government can take legal action to collect on its loans indefinitely.

How does the statute of limitations apply to different categories of debt?

Different categories of debt which have different limits. The two main categories are oral and written contracts. Oral contracts are those which are made verbally, whereas written contracts are, well.. in writing. Private student loans fall under the written contracts category.

Disclosure by collectors

If you ask, collectors must tell you if the statute of limitations has passed on the debt in question.

Negotiating after the statute of limitations is up

Once the statute of limitations is up, collectors are often much more willing to negotiate your debt. They no longer have the leverage of taking legal action, which gives you the upper hand.

What if you are sued before the statute of limitations is up?

In this case, the lender or debt collector may file a judgment against you to collect your debt by garnishing your wages or assets. You should show up in court to represent yourself or hire an attorney to do so.

What if you are sued after the statute of limitations is up?

If you are sued after the statute of limitations has expired, you still need to go to court with proof that the time limit is up. If you do not show up in court, the other party wins by default, despite the expiration of the statute of limitations.

Next, let’s take a look at what happens when you default on a student loan and how you can prevent it.

What happens when you default on a private student loan?

If you’re investigating the statute of limitations on private student loans, you’re likely already in default or at least struggling to keep up with your payments. This can be a paralyzing time, but knowing what to expect can make your next steps easier.

Here’s what you can expect once your loan goes into default:

1. Collection attempts by the lender.
2. The lender may hand off the debt to a debt collector who’ll use more aggressive tactics to collect it. They may contact you, your workplace, your family, etc.
3. The lender may report the debt to the credit bureaus, which will hurt your credit report and score.
4. The lender or debt collector can sue you to get a judgment against you. If they do so, they can get a court order to garnish your wages or assets.
5. If your lenders don’t sue you over the debt and the statute of limitations runs out, you’re protected from any further legal action.
6. The debt stay on your credit report for seven years from the date of the last payment.
7. Court judgments can stay on your credit report longer than defaulted loans, depending on the state you live in.
8. Student loans aren’t always forgiven with bankruptcy filings.

These are the basics of what you can expect when you fail to pay off your private student loan. Best case scenario, you aren’t sued. Worst case scenario, you are, and you face collection attempts beyond your control. You may have your bank account or wages garnished, and possibly other assets as well. The process can be very stressful and financially difficult, so it’s best to avoid default if possible.

If you can’t make your payments, how can you avoid default?

If you haven’t gone into default yet but are struggling to keep up with your payments, you still have options.

Forbearance or deferment

Some private student loan lenders offer forbearance, payment, or deferment programs for borrowers who are having financial difficulties.

• Forbearance allows you to pause or reduce your loan payments for a period of time due to a qualifying situation. With private loan lenders, forbearance is often limited to three months at most and may incur a flat fee. Also, interest will still accrue while a loan is in forbearance.
• Deferment also stops your payments temporarily due to a qualifying event. However, this option may allow you to sidestep the interest that accrues over the deferment period.
• A payment plan may let you reduce your monthly payment amount to make it more affordable.

For example, Commonbond offers deferment of loan payments if borrowers decide to go back to school. Additionally, the lender offers forbearance up to 24 months for qualifying hardships like bankruptcy, injury during military duty, prolonged financial difficulties, and more.

Splash, another student loan lender, doesn’t have pre-set forbearance or deferment programs, but they do work with borrowers on a case-by-case basis to find the best solution.

Federal student loans tend to offer better forbearance and deferment plans than private loans, but it’s still worth asking about. Talk with your lender, be honest about your situation, and see if you can work out a solution that will best serve both of you.

Refinance or consolidate your loan

You can also consider refinancing the loan. Shop around to see if any other lenders will offer you a lower interest rate than you currently have. Extending your term will also lower your monthly payment, although it can increase your overall cost. Also, if you have multiple student loans, it might be easier to keep up with your payments if you consolidate them into one.

Remember to shop around for refinancing options before missing a payment. If you wait until after you’ve missed several payments, your lowered credit score will make it harder to qualify for competitive rates. That said, if you already missed a payment, it’s better to apply before you miss another one.

If your credit has improved since getting your loan, you will likely qualify for a better rate. If not, applying with a cosigner may get you the rate you need.

Compare student loan refinancing lenders below!

The table below shows the statute of limitations of each state and the law that regulates it.

Find your best rates when refinancing or consolidating your private student loans

Does refinancing or consolidating your loan(s) sound like the right choice for you? Then check out SuperMoney’s student loan engine. You can find the best rates available for free, and all you need to do is answer a few questions. Within minutes, you can get competing offers, side-by-side, without any negative impact on your credit score.

Check your best rates here.

Jessica Walrack

Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.