Are My Private Student Loans Are Past the Statute of Limitations?

Question:

Dear Steve,

I have an education loan I took out in 2003, which was initially about 85,000 and is now about 120,000. But unfortunately, I cannot afford the monthly payments, and it is a private loan.

I have tried to maintain it out of default for years with Income-based plans, deferments, etc.

I recently read your article about stopping payment as the Statute of Limitations has run; I have, however, been making payments and trying to keep it out of default till this point.

My question is that it’s a private loan, and the Statute of Limitations has run (loan taken out in 2003). If I have some savings and other assets, would my student loan creditors be able to go after savings/assets if I stop paying?

Thank you,

Ann

Answer:

Dear Ann,

It would be wonderful if the Statute of Limitations (SOL) worked like that. It does not.

The Statute of Limitations runs from the date you last defaulted. So if you continue to make payments, it has not even started yet.

You would need to consult with an attorney licensed to practice law in your state to get a legal opinion about the SOL based on where you live.

Defaulting on private student loans is an option when there are no other good options. It is best done strategically and with a plan.

When you do default, you should be mentally prepared for collections to begin, balances to increase, listing your negative account status on your credit report, and threats or actual lawsuits by the lender.

You did make an interesting statement that you have private loans but an income-based payment. Those are only available on federal student loans. What you might have had is a temporary payment reduction or holiday. That will increase the balance since interest being earned is added to your balance.

It might just be that strategically defaulting on your private student loans is a matter of math and logic. Still, I’d feel much more comfortable if you talked through this situation and came up with a plan before doing anything. My friend Damon Day is an exceptional debt coach and someone you can chat with to get a plan and clarity.

Sincerly,

You are not alone. I’m here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don’t give up.

Damon Day - Pro Debt Coach