Is There a Statute of Limitations on Student Loans?

You stopped paying a student loan a long time ago. Nobody sued you, and you have been wondering whether it is too late for them to try.

The answer depends on what kind of loan it is. Federal student loans generally have no statute of limitations at all. Private student loans do, and in DC, Maryland and Virginia that deadline is three or five years.

Is there a statute of limitations on federal student loans?

No. Federal law removes the time limit on collecting federal student loans.

The Higher Education Act says no limitation ends the period in which the government can sue you, enforce a judgment, or collect through offset or garnishment. That covers loans held by the Department of Education and loans held by guaranty agencies, the organizations that insured older federal loans.

So a federal loan you defaulted on decades ago can still be collected today. Waiting it out doesn’t work.

How does the government collect a defaulted federal loan?

Mostly without going to court.

Treasury offset. The government can keep your federal tax refund and take part of certain federal benefits, including Social Security, to pay the loan. You get a written notice first.

Wage garnishment. The Department of Education can order your employer to withhold up to 15 percent of your disposable pay, meaning pay after required deductions, without suing you first. This is called administrative wage garnishment.

Collection costs. Costs are added to the balance, which can make a defaulted loan grow much faster than it would in repayment.

The government can also sue, though offset and garnishment are far more common.

How do I get a federal loan out of default?

There are two main paths.

Rehabilitation. You sign a rehabilitation agreement and make a series of on-time monthly payments. After the ninth payment, the Department of Education asks the credit bureaus to remove the record of default.

Consolidation. You apply to combine the defaulted loan into a new Direct Consolidation Loan. It is usually faster than rehabilitation, but collection costs and unpaid interest can be added to the new balance.

Either one can end the offsets and garnishment. Which is better depends on your income and how soon you need the collection to stop.

How do I know if my loan is federal or private?

Look at who made the loan. Federal loans come from the government’s student aid programs, with program names like Direct, FFEL and Perkins. Private loans come from banks, credit unions and other private lenders.

If you aren’t sure, check your loan paperwork, ask your servicer, and pull your credit reports. Many people have both kinds, and each loan has to be sorted on its own.

What is the statute of limitations on private student loans in DC, Maryland and Virginia?

Private student loans follow state law, like any other loan. The deadline is generally measured from the date of default.

DC: three years. DC law gives a creditor three years to sue on a consumer debt, which includes a private loan for school. That applies even if the loan agreement is under seal.

Maryland: three years. Maryland’s general deadline for a lawsuit on a debt is three years. Maryland also bars a creditor or collector from filing a consumer debt lawsuit after that deadline has passed.

Virginia: usually five years. Virginia allows five years to sue on a written contract you signed, and most private student loans come with a signed promissory note, the document in which you promised to repay. A loan without your signature on a written agreement gets three years.

Your loan agreement may also say another state’s law governs. Whether that changes the deadline depends on the contract and where you live and are sued.

Can a payment restart the clock on a private student loan?

It depends on where you are.

In DC and Maryland, once the deadline on a consumer debt has passed, a later payment or acknowledgment does not revive it. In Virginia, a written, signed promise to pay or a written acknowledgment of the debt can start a new deadline.

Before you make a payment on an old private loan, or sign anything a collector sends you, find out where the deadline stands. This post explains the deadlines and what restarts them.

What about my cosigner?

A cosigner signed the same loan and can be sued on it too. A parent or relative who cosigned your private loan is exposed to the same collection you are.

If a lender is pursuing both of you, both of you should get advice before anyone pays or signs anything. Here is why cosigning is risky.

What if I’m sued on an old private student loan?

Answer the lawsuit. The statute of limitations is a defense, and the court won’t apply it unless you raise it.

Private student loans are often sold or transferred after default, so the company suing you may not be the lender you borrowed from. The plaintiff still has to prove it owns your loan and what you owe. What a company that bought your debt has to prove works the same way for student loans.

Can bankruptcy help with student loans?

Sometimes, but the rules are different from other debt, and they differ for federal and private loans. I cover that in detail here.

Filing does stop wage garnishment and lawsuits while the case is open, and it can clear the other debts that make the student loans hard to pay.

What should I do right now?

If your wages are being garnished, a private lender has sued you, or you just don’t know what you owe and to whom, call me at (202) 448-5136. Bring your loan paperwork and any letters or court papers you have.

The consultation is free. I will tell you which of your loans can still be collected, whether any are time-barred, and what your realistic options are.

I defend private student loan lawsuits in DC and Northern Virginia, and I handle bankruptcy in DC, Maryland and the Eastern District of Virginia. Don’t wait. Garnishment and offsets keep running until you act.