Got private student loans?
I’ve got good news and bad news.
Bad news first.
Private Student Loans Inflexible
Private student loans have no built in mechanisms for deferment and forbearances, like government-backed loans do.
There are no income based repayment plans, as there are with federal student loans.’ No “outs” for disability or schools that close and leave you stranded.
No discharge in bankruptcy.
So, regardless of what life hands you, you have to pay according to the terms of the note.
But I promised you some good news.
Private Student Loans Must Play By The Rules
The promising news is that private student loans are hardy different in the eyes of the law than credit cards. That makes them subject to all the rules about collection that apply to any other debt.
One of those rules is timeliness. Lawyers call it the statute of limitations.
The rule essentially says that a creditor who isn’t being paid must sue within a fixed period, or lose the right to use the courts to enforce its debt.
The statute of limitations doesn’t prevent a debt collector for a private student loan lender from using all the usual tools of collection: fear, shame, and annoyance.
It just means they can’t win in court. Or, more precisely, they can’t win if you show up in court and assert the statute of limitations. [Read more…]