Is there a statute of limitations for private student loans?

Question

I heard that the government can collect on federal student loans forever. But I took out my student loans from a nongovernment private student loan lender.

Unfortunately, I've been in default for several years. Does the lender have to sue me by some deadline? And will it lose the right to sue me if the deadline passes?

Answer

You're correct that federal loans have no statute of limitations. But private student loans do—and state law sets the deadline.

If the lender misses that deadline, it loses the right to sue you.

What Are Private Student Loans?

Federal student loans are loans that the federal government made or guaranteed. They include Stafford loans, PLUS loans, Direct loans, and others.

Private student loans, sometimes called "private label loans," come from banks or other businesses, and aren't guaranteed by the federal government. (As of June 30, 2010, the federal government no longer guarantees student loans, it just makes them directly. But many people who took out loans prior to June 30, 2010 have federally guaranteed student loans—these don't fit within the definition of private student loans.)

What Is the Statute of Limitations for Private Student Loans?

The "statute of limitations" is a rule that sets a time limit within which a creditor may sue you for payment of a debt. The length of time that a creditor has to sue you on an unpaid debt, like a private student loan, varies from state to state. In some states, it's four years. In other states, it might be longer. To find out your state's statute of limitations for various types of debts, see Civil Statutes of Limitations.

If you're trying to determine if a statute of limitation has run, you must know when the period starts ticking. For most breach of contract actions, the limitation period starts running when the contract was first broken. That would be when you first stopped paying your student loan.

Reviving the Statute of Limitations

If you've defaulted on your student loan, and then you later make a payment, you might reset the clock on the statute of limitations. You might also risk reviving the time period in which the student loan creditor can sue you if you sign a new agreement to pay the debt, make a payment after the statute of limitations has run, or acknowledge your liability on the debt in some other way.

The specifics regarding when you revive a debt or reset the clock depends on state law.

What Happens if the Statute of Limitations Has Run?

If the statute of limitations has run on your private student loan debt, the creditor can ask you to voluntarily pay the debt. But it can't legally sue you, threaten to sue you, or take other actions against you to force collection of the debt.

Still, the lender might file a suit against you. In that situation, you would need to file a response (an answer to the suit) saying that the statute of limitations has expired. Talk to an attorney if you want to learn more about responding to a collections suit.