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  1. #1
    Join Date
    Oct 2013
    Posts
    2

    Default Private Student Loan Issued to a Minor Without a Cosigner

    My question involves collection proceedings in the State of: South Dakota.

    When I was 17 years old, I attended a college in Minnesota. I needed financial aid and applied through my school for student loans. This was the second college I attended in this town and the first school had gotten me subsidized Stafford loans through the federal government. My question does not involve those loans. This second school signed me up for Private Alternative Loans through a company called SLFC which is based in South Dakota. At the time, I had no idea I was signing up for a private loan. The information may have been provided to me, but I was 17 and didn't know anything about student loans whatsoever, except that federal loans could be deferred until one completed school. I signed the promissory note 2 months before my 18th birthday. I stopped attending this school one year later and moved on. According to the promissory note, the loan would become due when I stopped attending school full time so I presume the loan became due around late 2004 or early 2005.

    I never made any payments to the company and was quickly in default. In 2007, as they were constantly contacting me, I asked about a deferment. The company granted me a deferment in 2007, then a second one in 2008. They also allege that they offered me a third deferment in 2009 through 2010, though they don't have paperwork showing that I requested it (they do for the first two). The paper I signed for the deferment looks like the one used for federal loans, which was misleading. In fact, at the bottom it states that 'Interest will not be charged on my subsidized loans during my deferment. However, interest will be charged on my unsubsidized loans.' The loan was neither a subsidized or unsubsidized stafford loan, so the paperwork was likely borrowed from a federal loan deferment and further gave me the impression that this loan was a federal loan. The form also showed FFELP (Federal Family Education Loan Program) at the top and had language stating 'Use this form only if your outstanding FFELP loans were made after...' implying that I would only be using the form if I was deferring a federal loan.

    Later, in 2011, the company was again contacting me seeking repayment. I again requested a deferment or forbearance and was finally informed that they are not obligated to offer deferments because my loan is a private loan. This was the first time I realized that the loan was not a federal loan since it had been acquired in 2003. To this point, I had not made a single payment to the company, and I still have not to this date. At the time I was refused a further deferment, the company told me I was seriously in default and that my only option was to either pay the full balance or all the payments that had been due since the previous deferment had ended. I asked for a clean slate so I could begin making normal sized payments immediately, but they refused. Unlike federal loans, private loan companies are not obligated to offer modified repayment options or deferments.

    Recently, the company informed me that they would be referring my case to their attorney. I immediately requested a copy of my original promissory note and they forwarded it over. In the area where I signed and dated it, my original date(two months before my 18th birthday) was crossed out and a second date was entered to the right and initialed with my initials. The second date is 6 days after my 18th birthday. I don't remember re-initialing this document, but it's possible I could have. However, the handwriting of the initials is not distinctly mine and the capital H in my initials looks different than every other capital H I wrote on the page. The company also forwarded me the two deferment requests I had made.

    Here are my questions. Since I originally signed the contract prior to my 18th birthday, is the contract void due to the defense of infancy? I have read that the contract can only be voided while the minor is still a minor, but I'm not sure that's accurate, or makes any sense(since it still doesn't protect minors from making stupid long-term mistakes). If I initialed the contract and changed the date after the fact, is that legally binding to draw me out of the age of infancy?

    The statute of limitations in South Dakota appears to be 6 years and I have never made a single payment. The company is implying that my successive deferments in 2007, 2008 and 2009 (the third of which they can not provide documentation for) reset the statute of limitations. They have not specifically told me this, but that's my assumption of what they believe. This means that the statute would begin from the end of my last deferment when I defaulted again, which would be in early or mid 2010. I only submitted those deferments because I was under the impression that I was dealing with a federal loan and the paperwork used in the deferment process further confused me into believing that.

    What are my options here? I feel like I've been duped several times over and don't know what to do. The fact is that I did accept the loans and attend the school for one year, and they were just over $15k. With all the interest and penalties, they now say my balance is over $30k, but are willing to settle for $19k. I don't intend on settling with them, especially since they refuse to accept payments over a course of time, and will only accept the lump sum, which I do not have.

    They have threatened legal action before (but I don't have it in writing unfortunately). This time they claim they will be submitting to their law firm in late October. Is there any way out of this for me, or am I up the creek without a paddle? Does anyone here believe that I should not be held liable for this debt, and will it definitely require a lawyer for me to wriggle free?

  2. #2
    Join Date
    Sep 2005
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    98,846

    Default Re: Private Student Loan Issued to a Minor Without a Cosigner

    You borrowed money, you have to pay it back.

    Had you acted in a timely manner, back when you were a minor or possibly within a reasonable amount of time thereafter, you would have been able to argue that the contract was voidable and that you should be allowed out of the contract by repaying the money you borrowed. But you have waited many years, your seeking multiple deferrals would also reasonably be viewed as ratification of the contract - and even if you could void the contract, you would still have to pay back the money you borrowed.

    You are free to argue to the court that you did not make or initial the change of date on the contract, but that's not material to the fact that you borrowed the money and owe the money to the creditor. Also, claiming "I don't remember whether or not I initialed this change" is not sufficient to establish that you did not.

    If these are not federally guaranteed student loans, you can consult a bankruptcy lawyer about the possibility that they are dischargeable in bankruptcy.

  3. #3
    Join Date
    Oct 2013
    Posts
    2

    Default Re: Private Student Loan Issued to a Minor Without a Cosigner

    I borrowed money while under 18 with no understanding of what I was doing. In regards to the statute of limitations, doesn't the acknowledge(by deferral) just toll the statute? The statute of limitations in South Dakota is 6 years and it's been at least 9 years since I was in default. Even if it was tolled for 3 years through deferrals, that still leaves me beyond the 6 year statute of limitations and they should not be able to bring an action against me. Is that incorrect?

  4. #4
    Join Date
    Sep 2011
    Location
    OH10
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    17,019

    Default Re: Private Student Loan Issued to a Minor Without a Cosigner

    You affirmed the loan at 18. You have kept tolling the loan by seeking deferments. If you feel the loan is no longer enforceable, wait until the take you to court and make that argument.

  5. #5
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Private Student Loan Issued to a Minor Without a Cosigner

    When you borrowed money, you have to pay it back. Even if I assumed that a seventeen-year-old didn't understand that, and I do not, it doesn't change the fact that an inherent part of voiding a contract is returning the other party to his original position - which you would do by paying back the money you borrowed.

    Your deferrals have absolutely nothing to do with your claim that you borrowed money as a minor. You chose not to take any action to void the contract for many years after you turned 18, you figured out some time ago that you have to repay money that you borrow, and you're simply not going to get out of paying back the money by saying, "But I borrowed the money a couple of months before my 18th birthday." Even had you backed out of the contract the day after you received the funds, you would still have had to pay back the money.

    The statute of limitations is predicated upon the date of your default, and you have told us that you arranged multiple deferrals before ultimately defaulting in 2010. If they sue you, you are free to try to argue that your deferrals shouldn't reset the date of default, but I don't expect that argument to succeed as it was you who requested the deferment and in association therewith you agreed to the date upon which payments would again be due. When you create a new date of default, the statute of limitations starts to run from that date. Also, if these were federally guaranteed student loans, odds are no statute of limitations applies.

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