Private Student Loan Debt

[dannym]

I took out a PNC (Private National Collegiate loan) back in 1996. I found out only later that this was actually a Sallie Mae private loan. I am currently in default on this loan and OSI (collection agency) is hounding me. I contacted Sallie Mae and they told me, and sent me a letter, stating that they no longer hold my loan and my balance with them is zero, and that the loan has been transferred to the agency that guarantees them, which is SLFR, a Sallie Mae company. Very confusing.

My question: Is this loan government backed or insured? OSI won't tell me. I want to pay it back but OSI's payment terms are totally unrealistic given my low paying job. I have been told by a lawyer that private student loans can be expunged through certain legal actions. Is this true? Before I retain a lawyer I would like to know if this loan is really beatable in court.

Your help is appreciated. Thanks in advance.

[Mr. Knowitall]

If the loan was through Sallie Mae, it was guaranteed and is not normally dischargeable. Specifically, no guaranteed student loan is dischargeable in bankruptcy unless the bankruptcy court finds, after a specially filed adversary proceeding, that repayment of the loan would impose an "undue hardship" on the debtor and the debtor's dependents.

Talk to your lawyer about why he believes you might qualify.

[dannym]

Some of Sallie Mae's loans are private loans. They are not Federally insured, and as such, according to my attorney are subject to a statute of limitations of 6 years. My particular loan taken back in 1996 is a private loan, so this is why he believes it is no longer enforcable.

I don't really know if he's right. Before I proceed to inform the CA why I won't pay I want to be 100% sure I'm right.

Thanks for your imput and any ther info you may have on this issue. Much appreciated.

Thanks,
Dan

[Justmy2cents]

Hey Danny,

Student loans are complex, especially private loans. Sallie Mae used to be a govt agency but went private several years ago. For details on their current greedy climate look at studentloanjustice.org. With your loan so long ago I would verify that it is truly private. If it is truly private, I firmly believe that your states SOL applies. This has even greater meaning if the debt was sold to a third party collection agency. That invokes the FDCPA which requires that 3rd party collectors abide by all laws of the state of residence including the state SOL.

There are some who will argue that any student lender with an agreement with the Secy of Education is immune from any SOL. I beg to differ and offer that any non-federal loan must face the applicable SOL. Even if the lender has such an agreement it is ONLY for the federal loans. Since private SLs are based on one's credit rating and carry higher interest rates than federal loans there can be no argument that these are no more than the regular garden variety unsecured debts. Maybe they can escape Bankruptcy due to the new BK laws but there is nothing to stop the SOL from applying. If they claim an agreement with the Secy of Ed let them prove it and let them further prove that their credit-based non-federal loans are included in that agreement.
No one has ever provided caselaw which contradicts my position. Make them
prove their point. If they cant they are full of bs. Remember that many of those attys who respond here are likely collection attys who are working against you. I am not one of them. Good luck to you.

[aaron]

You don't need case law. It's clearly spelled out by statute:

(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.

(b) Assessment of costs and other charges

Notwithstanding any provision of State law to the contrary—

(1) a borrower who has defaulted on a loan made under this subchapter and part C of subchapter I of chapter 34 of title 42 shall be required to pay, in addition to other charges specified in this subchapter and part C of subchapter I of chapter 34 of title 42 reasonable collection costs; and

(2) in collecting any obligation arising from a loan made under part B of this subchapter, a guaranty agency or the Secretary shall not be subject to a defense raised by any borrower based on a claim of infancy.

(c) State court judgments

A judgment of a State court for the recovery of money provided as grant, loan, or work assistance under this subchapter and part C of subchapter I of chapter 34 of title 42 that has been assigned or transferred to the Secretary under this subchapter and part C of subchapter I of chapter 34 of title 42 may be registered in any district court of the United States by filing a certified copy of the judgment and a copy of the assignment or transfer. A judgment so registered shall have the same force and effect, and may be enforced in the same manner, as a judgment of the district court of the district in which the judgment is registered.

[sandyman]

There is no question that 20 USC sec 1091 a removes statute of limitations for collection of federally insured student loans. In this lenders join a small select group that includes murderers and traitors that have no time protection. The issue here, however, is whether private student loans (Sallimae) fall into this category. I find no indication that they do.
The best course of action may be to consolidate all federal student loans, there are provisions for forbearance and deferment for these. For private loans which have aged more than 6 years: it seems these have passed the statute of limitations.

[Justmy2cents]

I totally agree with you sandyman. I see nothing in 20 USC 1091a that applies to a private student lender. A private lender would not be an institution receiving funds from the govt nor would they have any agreement with the govt because by definition they are a PRIVATE lender.
I find it outrageous to think the govt wants to let private banks make student loans with no risk when no tax money is being spent. That would make every student their own insurer of their education. So big banks are free to make guaranteed profits by risk free loans that the student must pay for no matter what? That doesnt happen with anything else. If you buy a car or house and it breaks down you can always give it up and not have to pay for the rest of it. I understand that the govt wants their tax-backed money from federal student loans. But private student lenders are private companies and should not be allowed to profit from every loan they make. That amounts to corporate subsidies in my opinion. Every private loan carries a risk of default and non-payment. If you are a private company and make a private loan, even for higher education, you must face the risks as well as the rewards. Public policy requiring repayment of student loans is based on taxpayer money. If a private lender makes a bad student loan, they should eat the loss since no tax money is lost. That is simply free enterprise. The govt does not need to help big lenders make more money at the expense of the unfortunate.

[aaron]

The fact that you don't see something in a statute, and haven't researched the issue further, does not make it untrue. And yes, federal guarantees of student loans and federal subsidies of interest rates constitute a subsidy to private lenders who participate in student loan programs.