Student loan statute of limitations: What to know about your college debt

Around 45 million Americans have federal student loan debt, and many people struggle to make a dent in their balance. Some people in that circumstance wonder if there is a time limit for debt and what happens if they stop paying. It’s helpful to understand the statute of limitations when deciding how to approach your student loan debt.

A statute of limitations is a legal time limit that creditors and debt collectors must follow when collecting a debt. More specifically, the debt collection statute of limitations governs how long a creditor can sue you to collect an unpaid debt. For contractual debts like private student loans, states typically limit the debt collection time frame to somewhere between three and 10 years.

Which loans have a statute of limitations

Federal student loans do not have a statute of limitations, so lenders and collections agencies have no time limit when it comes to forcing you to pay (aka suing you). Whether you’ve been in student loan default for one year or 20 years, the loan holder could legally use the court system to compel you to pay if it desires to do so.

Private student loans, on the other hand, have a statute of limitations of anywhere from three to 10 years. After this, they become time-barred. The exact time frame depends on your state of residence.
If you’re trying to figure out whether your student loan statute of limitations has passed, you can review your state’s guidelines or contact your state attorney general.

How long is the statute of limitations on student loans for credit reporting?

Federal law also limits how long most types of negative information can remain on your credit report. In most cases, the Fair Credit Reporting Act (FCRA) allows derogatory items like defaulted debts or collection accounts to stay on your credit report for up to seven years.

Because federal student loans do not have a statute of limitations, these negative accounts can remain on your credit report indefinitely. Only after you pay your federal student loans can the default be removed from your credit reports — and even then, it will still take seven years from the time of repayment for those accounts to be removed.

What happens when the statute of limitations expires?

Once the statute of limitations runs out on a debt, it is considered “time-barred.” But a time-barred debt isn’t the same thing as debt forgiveness.

An expired statute of limitations prohibits a creditor or collection agency from suing you, but you may continue to receive collection calls and letters, and the account might still remain on your credit reports.

Can student loans ever be discharged?

While many types of debts can be discharged through bankruptcy, student loans are much harder to erase. To have them discharged, you’ll need to prove to the court that repaying the loans would cause you undue financial hardship. This could mean demonstrating that:

• You’re unable to maintain a minimal standard of living if you have to repay the loan.
• Repaying the loan would cause you to remain in a financial hardship status for a significant portion of the loan repayment timeline.
• You’ve already tried in good faith to repay the loan before you filed for bankruptcy.

If you can convince the court that repaying your student loan would cause you undue financial hardship, the court may opt to discharge your debt. However, the bankruptcy court might also decide to discharge only part of your debt or to adjust your loan repayment terms instead.

Private student loans may be a little easier to include in a bankruptcy filing than federal student loans. A recent New York appeals court ruling found that private student loans aren’t protected from bankruptcy discharge, which could encourage more borrowers to pursue this option. Some lawmakers are also working to introduce an easier path to bankruptcy for federal student loans, allowing federal loans to be discharged after a 10-year waiting period.

Student loan forgiveness and cancellation

Some students can get their loans forgiven if they fit certain criteria. For instance, the Public Service Forgiveness Program allows some borrowers to have their balance forgiven if they work for a qualifying government agency or not-for-profit organization and have made 120 monthly payments. Some teachers also qualify for loan forgiveness.

In addition, the Biden Administration has been working to provide other forms of relief for individuals with student loan debt. The Saving on A Valuable Education (SAVE) repayment plan was introduced to cut undergraduate student loan payments in half and ensure that a borrower’s balance will not increase due to unpaid interest.

But the administration’s plans have been blocked on multiple fronts by the courts in several states. That said, as of July 19, 2024, all student loan payments under the SAVE plan have been put on hold due to ongoing appeals processes. Because of this, any SAVE enrollees will not have to make monthly payments, and interest will not accrue until further notice. Student loan borrowers are also encouraged to apply for income-driven repayment plans — like SAVE — even if they aren’t sure they are eligible.

The bottom line

The consequences of defaulting on student loans can make your financial life difficult in a number of ways. These negative accounts can damage your credit history and credit score, making it hard to qualify for new financing until you resolve the situation. Defaulted federal student loans also don’t have a debt collection statute of limitations, and you may not be able to discharge these debts in bankruptcy.

If you’re struggling with defaulted federal student debt, you might want to consider whether student loan rehabilitation or consolidation could benefit you. With defaulted private student loans or federal loans where consolidation or rehabilitation isn’t an option, it might be helpful to speak with a student loan attorney or an organization that offers student loan help for personalized advice.