I Have $210K of Student Loans, But Debt Collectors Stopped Calling. Am I Free?

Almost everyone looks back at something they did when they were younger and thinks, “Yeah, that was stupid.” That can be a particularly painful thought when that something involves taking on student loan debt. Unfortunately, millions of people know that pain, and because of the laws unique to student loans, they may have to live with that pain for a very, very long time.

Bryan, a 30-year-old making about $26,000 a year while establishing a career in the L.A. film industry, is one of them. He borrowed roughly $124,000 about a decade ago to go to film school — about $10,000 in federal loans and the rest from private lenders — but he defaulted in 2009. With interest, he owes more than $210,000. That’s a massive debt load for any undergraduate education, let alone the fact that Bryan went to school for only a year and a half.

“An 18-year-old should not have been allowed to make [the] kind of financial decisions that would wreck a 30-year-old’s life,” Bryan said.

In the 10 years since he left school, he says he’s dealt with nightmarish debt collectors, had his wages garnished and lost out on his tax refunds. Despite having taken out the loans with no co-signer, Bryan said his family received calls from collectors for years. (Bryan asked to remain anonymous so his story wouldn’t find its way to his creditors.)

Then, it stopped. He hasn’t heard from a debt collector in a long time, and he’s now rehabilitating his federal student loans. (If he makes nine consecutive months of on-time payments, the default on the federal loans will be removed from his credit report.) He checked his credit report recently for the first time in years, and he saw that his private student loans had been charged off. (You can get a free credit report summary on Credit.com if you want to see where you stand.)

With no one contacting him about the debt and his federal student loans in rehabilitation, he’s starting to wonder if he can move on with his life and start thinking about things a typical 30-year-old might want to do, like make headway in his career plans, save for retirement or plan to buy a house someday. Understandably, he’s worried about his ability to do this.

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“What’s the point in investing and moving forward with your life if it’s all at risk to be taken away?” he said. “I want some reassurance that I’m OK legally.”

There’s no simple answer to this, but here are some of the things Bryan and anyone in a similar situation should know.

Private Lenders Can’t Chase You Forever

There’s a statue of limitations on private student loans that bars creditors from suing borrowers over the debt after a certain period of time. The statute of limitations varies by state, and even if the time frame has passed, some states still allow lawsuits depending on the contents of the loan contract. (You can check your state’s statute of limitations here.)

It’s not easy to figure out if the statute of limitations has expired on your loans. The clock generally starts ticking from the time of your first missed loan payment, but any period of forbearance may not count toward the statute-of-limitations countdown. If you make any payments, you could restart the clock.

“Just to make it even more fun, many notes consider default discretionary,” said Joshua Cohen, a consumer law attorney who goes by The Student Loan Lawyer. “They may decide even if you haven’t paid in 4 years they haven’t declared you in default yet. There’s no clear-cut answer.”

It’s complicated, and it’s not like you want to call up your loan servicer and ask, “Hey, where are we with this whole statute of limitations thing?” In a way, you just have to wait it out and hope you don’t get sued.

What Happens If The Lender Sues?

If the lender sues you over the debt before the statute of limitations expires, you could be ordered to pay. If you haven’t already consulted a student loan lawyer in your state, this would be the time to do that. Even before you get to this point, you may want to go to a lawyer to understand what could and couldn’t happen, rather than try and figure it out on your own or bury your head in the sand. (Not to mention the fact that a judgment will further destroy your likely already bad credit.)

You Can Bounce Back From Massive Student Loan Debt

If Bryan doesn’t get sued (it’s unclear if the statute of limitations has expired on his debt, but given where he lives and the information he has on his credit report, he may be close), he shouldn’t have to pay that six-figure private loan balance. He’ll always technically owe that debt, but the owner of his debt won’t be able to enforce it after the statute of limitations expires, and the charge-off will eventually age off his credit report.

The charge-offs and the statute of limitations don’t have anything to do with each other, Cohen said. The charge-off isn’t really an issue at this point, other than the negative effect it has on Bryan’s credit. He could still be sued if the statute of limitations hasn’t expired, even though the lender charged off the debt. Eventually (seven years plus 180 days from when he missed his first payment, to be exact), the charge-offs should no longer hurt his credit. That, coupled with the possibility he may not get sued for the debt, means he can move on from what he said was a huge mistake (Bryan said that even if he had gotten the degree he started studying for, it would have been worthless).

While waiting for the charge-offs to come off his credit reports, Bryan may be able to start rebuilding his credit. Rebuilding credit is more than just getting rid of the bad stuff — you have to have positive credit references, too, so something like using a secured credit card can help start that process.

A secured credit card requires a deposit (that deposit serves as your credit limit), so that may be a challenge to come up with if you’re already cash-strapped, but if rebuilding credit is the goal, that’s one of the easiest ways to do it. (You can get a better understanding of how secured credit cards work here.)

This probably sounds a little messy and complicated — it is. Still, Bryan is optimistic. He has found ways to be frugal and make ends meet in an expensive city, where he finally has work in the industry he set out to join when he started film school 10 years ago. He said he wishes he would have gone to community college instead of film school (he tried after leaving film school, but it wasn’t financially possible at that point), but he was able to eventually get a job he wanted by doing side work in the film world while also paying the bills with temp jobs. After 10 years of struggling with crushing student loan debt, he hopes he can start moving forward.