Question:
Dear Steve,
I know I am not the first in this situation. In 2005-2007 I took out private student loans before I realized that you could file FAFSA and it would do the work for you. After that realization I took out Federal Student loans. My federal student loans are in good standing, however my Private loans are in default – totaling about $65k. They have been defaulted for a decade. I’ve never made a payment on them because the bank wouldn’t work with me on an affordable payment plan. According to my credit report the accounts were closed and sent to collections in February of 2013.
My question is will these private student loans ever fall off my credit report? Or how do I get them removed? And if I’ve never made a payment when did the statute of limitations start, when I opened the loan or when it was sent to collections? Could you give me a more general idea of what it all means? Thank you!
Alaina
Answer:
Dear Alaina,
Thank you for reaching out to me for help.
The Statute of Limitations (SOL) can be tricky. It’s not as simple to determine when it starts and stops by looking it up on the internet. The only way to get a definitive answer about when the SOL is up on your private loans would be to talk to a licensed attorney in your state. Things like moving out of state, which state may be considered the primary state in the agreement, or a host of other things can start and stop the SOL clock.
Even then the SOL is not an erasure of your private student loan debt. It simply means if the debt is past the SOL and you are sued, you could raise it as a defense that you should not be sued.
The SOL does not prevent either the collection of the old loans after the SOL or you being sued once it expires.
It also gets tricky when you understand you could accidently restart the SOL clock if you acknowledge the debt, admit to the debt, or make a payment or payment arrangement.
Being in default on private student loans is not the end of the world and can lead to some resolution. See Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.
If you are in default on the loans and working with a knowledgeable student loan attorney or debt coach then inquiries from the collector can become the starting point for negotiations and a settlement.
Once you deal with the defaulted private student loans you can then focus on rebuilding your credit.
The private student loans should fall off your credit report no latter than 7.5 years from the time the account last went into default. But falling off a credit report does not mean the debt is magically eliminated.
