Biding your time until your student loans expire? It’s understandable to want to wish away your student loans. Unfortunately, hoping they hit an expiration date and then magically evaporate isn’t likely to happen. Federal student loans never expire, and while it’s not out of the realm of possibility for private loans, it is highly unlikely.
In this article, we’re first going to get into why your student loans aren’t likely to expire. And then we’ll get to the crux of the issue: dealing with student loan debt. Perhaps if you can make your debt more manageable, you won’t spend as much time wishing it would expire.
Federal Student Loans Don’t Expire
Whether you’ve been paying off your student loans for six months or six years, it might be tempting to give up and stop paying your loans entirely, hoping that they will eventually expire. If you’re wondering “when does my student loan expire?” the answer, for federal loans, is never. That’s right—there is no statute of limitations for collections on federal student loans, which means that if you stop making payments, your lender or a debt collector can sue you to force you to pay up no matter how long it has been since you last made a payment.
So what happens if you do stop paying your federal student loans altogether? First, your total balance will continue to increase. Whether or not you’re making any payments, interest will accrue, which means that every month your lender will add your new interest payment to your underlying loan.
As if that doesn’t sound bad enough, after at least 270 days of non-payment, your federal student loan will be in default and a number of things can happen including loan acceleration (meaning your entire balance becomes due) and your loan can be sent to collections, which can damage your credit score and lead to additional fees from a collection agency. The federal government may also decide to withhold your tax refund or even garnish wages directly from your paycheck. They also can sue you to force you to pay up.
While you can technically get rid of federal student loans in bankruptcy, it’s extremely rare. In order to potentially get your student loans (federal or private) discharged in bankruptcy, you would have to prove that paying your loans would cause you “undue hardship” (to borrow a phrase right from the U.S. Bankruptcy
Code ). Proving that paying your loans would cause “undue hardship” typically involves passing the Brunner
test , which is a test many courts use that basically lays out ways in which you might claim “undue hardship.”
In short, it’s far from a sure thing and the process is not especially clear cut. But whether you’re 19 or 90, your federal student loans will not just automatically expire after a period of non-payment, and failing to pay has some serious consequences.
Some Private Loans May Have Statutes of Limitations
Unlike federal student loans, private student loans may be bound by a statute of limitations on collections. The statute of limitations varies by state and is generally between three and 10 years from the date you totally stop engaging with your lender at all.
Before you cancel your monthly payments, it is important to know that a statute of limitations is not the same thing as an expiration date on your loans. A statute of limitations is merely a limit on the time that a lender or debt collector has to sue you in court to force you to pay back the loans.
Even if your debt is outside of the statute of limitations, you still technically owe the money, and failure to pay could lead to default.
Alternatives to Waiting for Student Loans to Expire
Just because student loans don’t technically expire doesn’t mean that there aren’t other ways to lower your student loan debt. For example, some students may qualify for federal loan forgiveness.
Public Service Loan Forgiveness (PSLF) is available to some professionals who work in certain fields like government, the nonprofit sector, and healthcare. The idea behind federal student loan forgiveness is to encourage grads to fill needed jobs without worrying that they will never be able to pay off their student debt on a public interest salary.
Unfortunately, PSLF requires that you make 10 years of qualifying payments, and by some reports, very few people who thought they would qualify for loan forgiveness actually ended up getting it. Still, federal loan forgiveness may be a good option for public servants with lots of debt left to pay.
Another option to save money on your student loans is student loan refinancing. Loan refinancing doesn’t change the underlying amount that you owe, but it may reduce the amount of money you spend on interest and may help you secure better payment terms, which can add up to some serious cash over the life of your loan.
Refinancing your federal and private loans based on your current credit score and income may allow you to score a brand new loan with a better interest rate or a shorter payoff term. Just know that if you are working toward Public Service Loan Forgiveness, refinancing with a private lender will disqualify your loans from this and any other federal program.
When you refinance with SoFi there are no origination fees or prepayment penalties. As a SoFi member, you’ll gain access to a variety of benefits including Unemployment Protection—in the event you unexpectedly lose your job, you may qualify to temporarily pause your loan payments. To see how refinancing your loans could help you spend less money in interest, you can take a look at this student loan refinance calculator.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION. Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.