Should I Bother Settling an Old Navient Private Student Loan?

Question:

Dear Steve,

I have a private student loan from Navient and it is long past the time that I can be sued. They have offered a settlement amount.

My question is- if this Private student loan from Navient is never paid back, will the Social Security department hold my benefits at retirement until the debt is paid off?

Bert

Answer:

Dear Bert,

We need to get you straight on some facts.

1. A private student loan can’t garnish your Social Security check. Government benefits can be garnished through an Administrative Wage Garnishment for government owed debts. If this was a federal student loan then that would be a concern.

2. The time you can be sued is misleading. The Statute of Limitations (SOL) is different in different states. It can also start and stop for various reasons. But the biggest issue is it does not prevent you from being sued or subject to collections.

If you are sued you would have to raise the SOL as a defense. It does not block actions.

And just because a debt is outside the SOL does not prevent a collector from attempting to recover the money.

So it might make sense to settle the old loan if it is a good deal, will not generate a new tax liability over forgiven debt, and you find value in closing the door on the old debt and not having to worry about it again.

I would suggest you talk to my friend Damon Day about your specific circumstances and he can guide you on the best strategy forward. For a definitive answer on the SOL in your state, you would need to talk to a licensed attorney there. Only a licensed attorney in your state can give you a legal opinion.

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