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Is there a statute of limitations on student loan debt?

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If you’ve defaulted on student loans, it’s important to understand the student loan statute of limitations to avoid potential legal issues. (iStock)

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Most creditors and debt collectors have a limited window for filing a lawsuit to collect a debt. This window is known as the statute of limitations.

Knowing the statute of limitations that applies to your debt is important if you’ve defaulted on your federal or private student loans. This article will cover whether there’s a statute of limitations on student loans, how long it lasts, and what it means for you.    

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Is there a statute of limitations on student loan debt?

Most statutes of limitations range from three to six years, but this can vary by state law, the type of debt you have, and the terms of your credit agreement, according to the Consumer Financial Protection Bureau (CFPB).

Federal student loan statute of limitations

Unfortunately for struggling student loan borrowers, there’s no statute of limitations period for federal student loans. No matter how long your federal student loans have been in default, the federal government can pursue collection by wage garnishment or seizing tax refunds or other government benefits. But the garnishment can’t exceed 15% of your disposable wages.

Private student loan statute of limitations

Most states have different statutes of limitations based on the type of debt you owe. There are generally four types of debt:

  • Oral agreements — With an oral agreement, you borrow money from someone and agree to pay it back, but not in writing.
  • Written agreements — You have a written agreement detailing how much you borrowed, when you borrowed it, how much interest you’ll be charged, how you’ll make payments, and other terms. This is common with auto loans and medical debt.
  • Promissory notes — Promissory notes are written agreements but are usually less detailed than written contracts. Mortgages and student loans are usually considered promissory notes.
  • Open-ended accounts — These are credit accounts that remain open for an undetermined length of time. Credit card debt and other lines of credit fall into this category.

A state may have different statutes of limitation for credit cards, oral agreements, written agreements, and promissory notes, and the timelines for each type of debt vary by state. In most states, the statute of limitations for promissory loans (which covers most private student loans) is six years, but can be as short as three years or as long as 10 years. 

Once the statute of limitations has passed, the debt is considered “time-barred,” and the creditor can’t sue you or threaten to sue you.

When does the student loan statute of limitations begin?

The statute of limitations usually starts when you miss a payment on a debt, although it can also start when you made your most recent payment or partial payment. The official start date varies by state law as well. 

For example, say the statute of limitations on private student loans in your state is six years and starts on the date you miss a payment. If you missed your payment on Jan. 1, 2021, your statute of limitations would run through Dec. 31, 2027.

Check with your state’s attorney general’s office or a lawyer familiar with your state’s debt collection laws to learn about the laws that apply to your situation.

Can you restart the student loan statute of limitations?

In some states, the statute of limitations can be restarted quite easily. For example, if your state starts the clock on the date of your last payment, then making a partial payment — even after your loan is in default — can restart the clock. Some states also restart the clock on the statute of limitations if you acknowledge the debt in writing.

Credible lets you compare student loan refinance rates without affecting your credit score.

What happens when the student loan statute of limitations ends?

If your debt is outside of the statute of limitations, this doesn’t mean you no longer owe the money. It just means that the lender has fewer collection options and can no longer sue you to collect the balance.

Lenders can still try to collect the debt by calling you and sending letters, as long as they don’t violate the Fair Debt Collection Practices Act.

If a creditor or debt collector sues you after the statute of limitations has expired, don’t ignore it. A court may still award a judgment against you if you don’t raise the statute of limitations as a defense, according to the CFPB. For that reason, it’s a good idea to discuss your situation with a lawyer familiar with debt collection laws in your state.

Should you try to settle your student loan debt?

Settling your student loan debt involves negotiating with the lender and getting it to agree to accept less than the full amount owed as final payment on your debt.

That might sound appealing — especially if you can’t pay off your debt in full. But there are some downsides, such as:

  • Damage to your credit score — When you settle a debt, it shows up on your credit score as “settled.” This is a negative item on your credit report and will stay there for seven years, dragging down your score.
  • High fees/low success rates — Many companies advertise debt settlement services, promising to help you get out of debt for “pennies on the dollar.” But their services are expensive, with fees as high as 15% to 25% of the total debt you enroll in the program. Plus, it’s not always successful. Fewer than half of debts are settled after three years, according to the National Foundation for Credit Counseling, a nonprofit credit counseling organization.
  • Forgiven debt may be taxable — Generally, when a debt is settled or forgiven, the forgiven amount is considered taxable income. While some federal student loan forgiveness programs aren’t taxable, settled private student loans generally are taxable.

If you decide to negotiate a settlement with the creditor, get the creditor’s agreement in writing before making your payment. Otherwise, you could end up restarting the statute of limitations on your debt, only to find out that the creditor doesn’t plan to live up to their end of the agreement.

Ways to minimize student loan debt

Waiting out the statute of limitations isn’t the only — or even the best — way to deal with student loan debt. If you’re having trouble making payments or are already in default, consider these options:

  • Refinance your student loans. Refinancing your student loans may allow you to swap out your current student loans for a new loan with a lower interest rate, saving you money over time. But proceed with caution before refinancing federal student loans. Refinancing federal loans into a private loan means losing valuable benefits and protections, including deferment, forbearance, income-driven repayment plans, and federal loan forgiveness programs.
  • Enroll in an income-driven repayment plan. An income-driven repayment plan sets your monthly federal student loan payment at an amount intended to be affordable based on your income and family size. The Department of Education offers four income-driven repayment plans, all of which forgive any remaining loan balance if your loans aren’t fully repaid at the end of the repayment period.
  • Sign up for an Extended Repayment Plan. An Extended Repayment Plan is a type of repayment plan offered by the Department of Education that allows you to make lower monthly payments over a longer period — usually 25 years. This can help make your monthly payment more affordable. But keep in mind that extending your repayment term likely means you’ll pay more total interest.
  • Consider deferment or forbearance. Deferment and forbearance both allow you to postpone or reduce your federal student loan payments temporarily. Deferment is generally available when you’re facing a temporary personal or financial hardship. Examples include undergoing cancer treatment, serving in the Peace Corps or military, unemployment, or returning to school. While your loans are in deferment, no interest will accrue. Even if you don’t qualify for deferment, you may still qualify for forbearance if you can’t make your federal student loan payments due to financial hardship, medical expenses, change in employment, or other reasons. While in forbearance, interest will continue to accrue.

If you’re ready to refinance, you can use Credible to easily compare student loan refinance rates.

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