Question:
Dear Steve,
I have eight private student loans past the statute of limitations, which fell off my credit report, with interest combined to over $200,000 debt value.
One loan, the largest loan in my account, has been forgiven by Navient, which I recently learned via email. I wanted to share this email with you, so you know what to expect to help others (my info has been removed). [Thank You!]
I received an email from Navient stating that one of the eight private student loans in my account (all of which previously defaulted, they are past statute of limitations, and fell off my credit report already) have been forgiven.
This was because of the Navient/Sallie Mae lawsuit. This loan happened to be the largest loan I had, which was quite a large sum with the interest they tacked on over the years.
They also clearly state that the other seven loans in my account are still due, as they provide in the email. I was going to ask you if you thought that taxes would need to be paid on this forgiven loan, but the email they sent CLEARLY states towards the bottom that this forgiven loan amount IS NOT considered taxable.
What do you think the chances are that they will contact me again before June 30th this year, possibly showing some of the other loans in my account as being forgiven?
I feel like that probably will not happen, though. If they were going to forgive other loans in my account, they probably would have included them in this email.
I’m also already in touch with Damon Day about this topic, and I’m currently waiting to hear back from him.
David
Answer:
Dear David,
The Navient settlement that forgives some private student loans is a mess. It is the poster child of a lack of clarity.
People are getting some private student loans forgiven, but I’ve yet to see someone that had all forgiven. It appears to me that while the headlines claimed private student loans from Navient would be forgiven, the settlement allowed Navient to write the rules on which ones.
I’ve asked around people involved with the settlement deal, and nobody has any specific guidance on the exact loans to be forgiven. The only answer I can give you about additional loans being forgiven is it might be possible but I doubt additional forgiveness is coming for you.
Thank you for including a redacted copy of the email you received.
When it comes to the potential tax liability for the forgiveness, the email does say there is no federal tax liability, but it goes on. It is not clear if you might have any state tax liability.
In a situation like this, working with Damon is a smart move. As simple as the situation might appear to many people. It is a minefield.
The last thing you want to do is accidentally restart the clock on these old debts past the statute of limitations. It can be easier than you might expect to give a creditor a reason or excuse to do that.
A debt collector and the original creditor can contact you past the statute of limitations. They can try to trip you up to bring these loans back to life and start the collection clock. What have they got to lose?
The statute of limitations (SOL) defense is one to be raised if you are sued over an old debt. It does not prevent collections activity or being sued. Slowly those rules are changing. Very slowly. So be prepared to combat attempts to revive these debts.
The email you sent me is an excellent example of unclear information. Your impression is they state the other loans are still due. However, they say, “you are still responsible for any other federal or private student loans you have taken out that are not listed above.” They also say, “Making payment arrangements on student loans that have not been forgiven remains your responsibility.”
They don’t specifically say that your old loans are still payable within the statute of limitations. Making payment arrangements for loans outside the SOL only benefits Navient, not you.
Should you volunteer to repay these loans or restart the SOL clock on these loans, that is a greater life discussion. We could spend a year debating all the sides of that question. Was the education overpriced, substandard, a reasonable value, pushed on you, etc. At what point do both schools and lenders accept responsibility for pushing loans at students? What life responsibility do debtors have? Are people now in student-loan servitude, or do they deserve a chance to make the future better?
Bottom Line
The smart move here would be to work with an experienced debt coach like Damon Day to discuss all of the issues and come up with a plan of action you agree with and are confident about.
Don’t accidentally trip a landmine, and be prepared for the surprises of paying or not paying these loans moving forward.
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.
