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  1. #1

    Default Statute of Limitations on Private Student Loans

    I've seen this question come up before and so I'd like to see if anyone can give me the current conventional wisdom on this topic. The federal government bars state SOLs from applying to student loans when those loans are federally backed or guaranteed. Many of today's student loans though are completely private and are not backed by the government. These private loans, I believe, are subject to state SOLs unless the state itself has a provision removing it from the state SOL. The federal government has no such provision as far as I can tell.

    Here is the federal statute dealing with SOLs and student loans. Check out the statute and see below for my analysis.

    Title 20 of the United States Code, Chapter 28, Subchapter IV, Part F, Section 1091a. Statute of limitations, and State court judgments
    ------------------------------------------------------------------------

    (a) In general
    (1) It is the purpose of this subsection to ensure that obligations to repay loans and grant overpayments are enforced without regard to any Federal or State statutory, regulatory, or administrative limitation on the period within which debts may be enforced.

    (2) Notwithstanding any other provision of statute, regulation, or administrative limitation, no limitation shall terminate the period within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action initiated or taken by —
    (A) an institution that receives funds under this subchapter and part C of subchapter I of chapter 34 of title 42 that is seeking to collect a refund due from a student on a grant made, or work assistance awarded, under this subchapter and part C of subchapter I of chapter 34 of title 42;

    (B) a guaranty agency that has an agreement with the Secretary under section 1078 (c) of this title that is seeking the repayment of the amount due from a borrower on a loan made under part B of this subchapter after such guaranty agency reimburses the previous holder of the loan for its loss on account of the default of the borrower;

    (C) an institution that has an agreement with the Secretary pursuant to section 1087c or 1087cc (a) of this title that is seeking the repayment of the amount due from a borrower on a loan made under part C or D of this subchapter after the default of the borrower on such loan; or

    (D) the Secretary, the Attorney General, or the administrative head of another Federal agency, as the case may be, for payment of a refund due from a student on a grant made under this subchapter and part C of subchapter I of chapter 34 of title 42, or for the repayment of the amount due from a borrower on a loan made under this subchapter and part C of subchapter I of chapter 34 of title 42 that has been assigned to the Secretary under this subchapter and part C of subchapter I of chapter 34 of title 42.


    Those claiming that private student loans are exempt from SOLs look to 1091a2B for support. But examination of the bolded language suggests that this provision ONLY applies to loans made "under part B of this Subchapter." The language "this Subchapter" refers to the Subchapter of the law that Section 1091a lies within. That would be Title 20, Chapter 28, Subchapter IV. So "part B of this Subchapter" would refer to part B of Subchapter IV. What is part B of Subchapter IV? The Federal Family Education Loan Program, or FFELP.

    So since 1091a2B ONLY applies to loans made under Title 20, Chapter 28, Subchapter IV, Part B, and since that is the section of Title 20 dealing with FFELP loans, that means that 1091a2B ONLY applies to FFELP loans, i.e., federal student loans, NOT private student loans.

    Thus, private student loans ARE SUBJECT to state statutes of limitation unless there is some other provision excluding them.

  2. #2
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    Default Re: Statute of Limitations on Private Student Loans

    When the federal law applies so as to prevent the application of a statute of limitations, it preempts any state statute of limitations. If you think otherwise, you're confused.

  3. #3

    Default Re: Statute of Limitations on Private Student Loans

    Quote Quoting Mr. Knowitall
    View Post
    When the federal law applies so as to prevent the application of a statute of limitations, it preempts any state statute of limitations. If you think otherwise, you're confused.
    That was not my argument.

    Here is my argument from my original post.

    There is a federal law that prevents the application of state SOLs to federal student loans. That law is the one I quoted above in my OP.

    There is no federal law that prevents the application of state SOLs to private student loans. Therefore, private student loans continue to be governed by state SOLs.

    If anyone can find a federal law preventing the application of of state SOLs to private student loans, produce it.

  4. #4

    Default Re: Statute of Limitations on Private Student Loans

    The loans in question are private loans and are not federally issued or guaranteed.

  5. #5
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    Default Re: Statute of Limitations on Private Student Loans

    From what I see in the original post, the loans at issue are hypothetical, and your original post also makes clear that you're assuming things about the hypothetical loans ("These private loans, I believe..."). If you assume a loan is private, and assume it's not federally guaranteed, it becomes reasonable to assume that the statute of limitations can apply. But that does nothing to tell us the situation with an actual, real-life loan - for that, we need to know the actual facts. Read this.
    Quote Quoting Common Disputes Involving Defaulted Student Loans
    Statute of Limitations Section 484A(a) of the Higher Education Action provides that no statute of limitations bars enforcement action to collect Federal student loans, including collection by offset, lawsuit, or enforcement on student loan judgments. 20 U.S.C. § 1091a(a). State law that would otherwise limit these actions is superseded by Federal law and cannot bar collection action.

    Bankruptcy

    Whether a bankruptcy discharge relieves an individual of his or her obligation to repay a student loan or grant overpayment is now determined by whether a court has ruled that repayment would impose an undue hardship on the borrower and his or her dependents. If the bankruptcy was filed on or after October 8, 1998, the loan or grant obligation is not affected by a bankruptcy discharge unless the debtor received an undue hardship ruling from the court.

    Prior to October 1998 changes in bankruptcy law, whether a loan or grant overpayment was discharged in a bankruptcy depended on different rules, depending on when bankruptcy was filed, how long the student loan had been in repayment, and what kind of student loan the debtor had received. Generally, loans or grant obligations owed and in repayment for more than five years, and later seven years by the time the borrower filed for bankruptcy relief were dischargeable by reason of the age of the debt. Debts owed and in repayment status for shorter periods were dischargeable only if a court ruled that repayment would pose an undue hardship. In addition, a general discharge received in a Chapter 13 (wage earner plan) bankruptcy that was filed before November 5, 1990 was sufficient to discharge a student loan or grant obligation without regard to how long the debt had been owed, even if the debtor failed to prove that repayment would pose an undue hardship.

    You should present documentation regarding your bankruptcy case to Department representatives, who can advise whether the Department considers bankruptcy law to relieve you of the obligation to repay this debt. You may seek advice from your bankruptcy counsel in this matter as well.

    If your bankruptcy petition was dismissed rather than discharged, then none of your debts, including your loan, were discharged.

    What to Do:

    You must submit to Department representatives the following documents to show when, and under what provision of law, you filed for, and received, relief in bankruptcy:

    • Court ruling, if any, regarding whether repayment would impose an undue hardship
    • Copy of the notice of the first meeting of creditors
    • List of creditors filed in the bankruptcy proceeding (schedule A-3)
    • Final Discharge Order

    Be sure to include a cover letter stating your name, social security number and the identification number(s) of the loan or grant obligation you believe was discharged.
    Check a recent demand letter or bill for this loan; if the address to which you are requested to send payment is the National Payment Center in Greenville, TX, you should submit your documentation to:

    U.S. Department of Education Unit
    Educational Credit Management Corporation
    P.O. Box 8809
    Richmond, VA 23225

  6. #6

    Default Re: Statute of Limitations on Private Student Loans

    "They said the loans were private, so I'm going to assume they are dischargeable even though I don't have a clue as to the actual facts."


    I did not say this and I did not mention discharge in bankruptcy—the issue was statute of limitations. If the loan(s) is not on the National Student Data Base registry (NSLD—get a pin/password and look up your loans), then they are NOT subject to 1091a—see the previous thread.


    Some of the confusion may be attributed to the way Sallie Mae attorneys define “private” student loans. For example, I’ve seen interrogatories prepared by Sallie Mae attorneys in Chapter 7 proceedings that define “government loans” as all loans HELD by the U.S. Dept. of Education that the debtor seeks to have discharged…” and “private loans-Sallie Mae Hemar Insurance Corporation of America, GRC and Sallie Mae Serving Corp” as referring to all loans HELD by the United States Dept. of Education that the debtor seeks to have discharged.

    Now, I haven’t seen a definition describing “private loans—Sallie Mae Hemar…..that are NOT HELD by the U.S. Dept. of Education” for purposes of bankruptcy dischargeability and after 2005, I’m not sure whether being held by the USDOE or not matters.

    On the other hand, in a nonbankruptcy action, it does matter. If the loans defined above are actually “held” by the U.S. Dept. of Education, then they will be on the NSLD and there is no state statute of limitations that would apply to prevent enforcement. If the loans are NOT on the NSLD (and assuming no clerical mistakes to prevent them from being on the NSLD if they in fact were made or held under the HEA), then they are subject to state SOL. Avoid any unnecessary delays in your proceedings and get a copy of the NSLD to determine whether HEA (and therefore 1091a) applies or not.

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