While a statute of limitations exists for most types of debt, including private student loans, it doesn’t apply to federal student loans, such as Stafford, Perkins, Parent PLUS and federal consolidation loans.
According to the U.S. Department of Education website, “You can’t avoid repaying your student loans because you didn’t know you had to repay them.”
The Student Loan Ranger receives many questions from readers on old, unpaid student loans. On occasion, we like to share some of the queries that other borrowers are likely to relate to. Here are a few questions we’ve addressed recently. Letters have been edited for clarity and to protect readers’ privacy.
Q: I have a debt that’s almost 50 years old, and I received a demand letter threatening to seize my social security income. I’d like to find a counselor to talk to. Suggestions?
This is a situation where it’s critical to act quickly and keep the lines of communication open with the agency that sent the letter. If the letter contained a specific statement of intent to garnish your social security income, you need to make sure you read the notice carefully and have a clear understanding of the next steps.
Even in a worst-case scenario, only up to 15 percent of your social security benefits can be subject to wage garnishment. The remaining total of your net income can’t be less than $750 per month.
When communicating with the agency, take time to validate the accuracy of the account information and inquire about different hardship payment plans. It’s also worth considering other affordable repayment options, such as a loan consolidation for the remaining balance.
The Student Loan Ranger also recommends reaching out to a nonprofit credit counseling agency, which can identify the best path forward based on an expert review of the most appropriate options. A counselor can help you understand the choices that make the most sense based on your current financial circumstances.
Q: I have a student loan that I defaulted on years ago. The first loan was in 1989 and the last was 1993, totaling $40,000. I was subject to a wage garnishment about seven years ago at 9 or 10 percent of my wages. It ended when I changed employers in 2014 and garnishment ceased.
I just received a debt statement letter from what looks like the Department of Education stating that they still intend to collect the debt. The statement indicates that I haven’t made any payments toward the debt. But this is false since my previous wage garnishment was nearly $500 per month.
The last thing you want to do is end up sending your hard-earned money to a student loan scam. While the letter may seem legitimate, the Student Loan Ranger always recommends taking an additional step to verify the legitimacy of the sender and validate the account information.
If the letter states that it’s from the Department of Education, you can contact the agency directly via its website or call 800-557-7394. Any bank records, paycheck stubs and other debt-related correspondence should be used to validate the accuracy of the information contained in the department’s database.
Your own records will be vital in demonstrating that you made payments toward the loan balance over a specific period. Keep in mind that the entire balance may not have been satisfied by the garnishment, which you say ended when you changed employers. If the department was unable to obtain information of your new employer, it may mean you still have a remaining balance to pay.
It’s also worth your time to obtain a copy of your credit report. It’s a good place to look for any evidence of unpaid financial obligations. It’s also good practice to check your credit report regularly. You can obtain a free annual copy from each of the major reporting agencies at annualcreditreport.com.
The Student Loan Ranger also recommends that borrowers compare what they see on their credit report with their own records and what the Department of Education is reporting. If there’s still a question regarding the accuracy of the records, you’ll need to use your information to dispute the balance and request a correction. Borrowers who want to dispute a loan balance will need to follow the department’s guidance, which is available on its website.