24 May Do I Have to Pay a 40-Year Old Student Loan I Don't Owe?
A Florida teacher was shocked by a phone call from a collection agency saying she has to pay $2400 for a 40-year-old student loan or be sued. But she doesn’t owe the money. She has never heard anything about owing this money. She contacted her student’s dad and my fellow blogger, Ft. Myers attorney, Carmen Dellutri.
Does she have any recourse? Can they really collect a 40-year-old debt? Maybe, maybe not.
Time limits, called statute of limitations, generally apply to most collection of debts. Eventually the debt gets so old, collection must stop. Public policy favors time limits because of the difficulty of proving old debts, payments made and any defenses as records disappear and memories fade. Time limits also bring peace of mind to borrowers and finality to the judicial system.
Time limits applied to student loan collections until 1991 when Congress changed the law and eliminated the collection time limits for government student loans. Now, there is no time limit on collection of government student loans, but there is a time limit on collection of private student loans.
So does our teacher have any options? If this is a government student loan, saying the debt collection was time barred prior to the 1991 law change might work, but probably won’t. Most courts have ruled against borrowers who claim the elimination of the statute of limitations defense does not apply retroactively to loans taken out prior to the law change. If this is a private student loan, and there have been no payments or other events that extended the time limits, the collection should be time barred.
Our teacher’s best bet is to defend the collection by insisting she doesn’t owe the money, period. She didn’t return to the school for the second year 40 years ago. Either the loan was not disbursed or the loan was not refunded to the lender when she didn’t enroll at the school. She should write a letter disputing the debt in writing to the lender and the debt collector. The letters should be sent by certified mail, return receipt requested, so she can prove they got her letters. Also, she should apply to the lender for a discharge of the loan based upon failure to make owed refunds.
Under the Fair Debt Collection Practices Act, the collector must cease collection of disputed debts. If the collector does not stop, our teacher should contact an attorney about making a claim against the collector for violations of the Fair Debt Collection Practices Act. If the collector inaccurately reports the status of the debt to credit bureaus, she may want to make a claim against the collector for violation of the Fair Credit Reporting Act. When she receives notice that her tax refund is going to be offset to collect the student loan, she will want to respond and dispute the debt. If our teacher is sued, she definitely will want to hire an attorney to defend the lawsuit. She might want to act proactively and file a declaratory action to ask for a court order declaring she does not owe the debt.
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