Student Loan Statute of Limitations
There is no statute or limitations for Government student loans. Federal Student loans are exempt from the state statute of limitations because of Section 484A(a) of the Higher Education Action and 20 U.S.C. § 1091a(a). However, Private student loans are subject to the statute of limitations and all the same defenses that any other contract would have. We often help debtors plan a Bankruptcy to eliminate student loans in our Louisville office. Until 2005 any bankruptcy that was filed eliminated private student loans. But after 2005 private student loans became non dischargeable.
When The Income Based Repayment Plan Is Not Good Enough
Often a person is able to file a Chapter 13 and make a minimum payment through the plan and wait until the statute of limitations has passed to defeat private student loans. In Kentucky the state statute of limitations is 15 years. I have seen some students that owed 250,000 or more in student loan debt. Although the Federal Government has an income based repayment plan for their loans there are no program to make private student loans affordable. Private student loans are more likely to sue and garnish wages, attach bank accounts and homes. If the student loan debtor has a lot of private student loans one answer is to file consecutive Chapter 13 cases to insure that the statute or limitations runs on the debts.
In one case I filed in the Eastern District the Debtor was about age 55 and had a 20% garnishment by DOE and another 20% by Kentucky Higher Education. Both of the government student loan lenders refused to negotiate. The Debtor merely filed a 100 dollar per month Chapter 13 repayment plan. Over 5 years 6000 is repaid but about 4,000 is repaid to attorney fees and court cost leaving only 2000 to the student loans. If this is done twice in two Chapter 13 cases only 4000 is repaid to the student loans over 10 years. 100 a month was far less than what the DOE wanted under a income based repayment plan. This allows the student loan debtor a way to live. When the Debtor retires at age 65 she would normally qualify for the disability discharge.
Dealing with collectors
Always beware of collectors that want you to refinance your debt. If you refinance a private student loan to catch it up the 15 year waiting period for the statute of limitations will start all over again. When you refinance a Private student loan often the collection agency will collect a commission and new loan will often be at a higher rate. Often the solution to Private student loans is to wait until the statute runs. The stay from a Chapter 13 bankruptcy prevents the creditors from collection and Government student loans can be paid in full during the Chapter 13 plan while unsecured debts and private student loans are paid 10% or less during the 5 years.