Federal student loans never expire. This is because, unlike private student loans, they have no statute of limitations. And while the clock technically can run out on private student loans, that doesn’t mean your student loans have vanished — rather, lenders simply can no longer take legal action to collect. Plus, waiting it out will wreak havoc on your finances.
As such, waiting for student loans to expire is not a recommended tactic to manage student loans. Read on to learn more about why your student loans aren’t likely to expire and more effective ways to deal with student loan debt.
Why Federal Student Loans Don’t Expire
If you’re wondering “when does my student loan expire?” the answer, for federal loans, is never. That’s right — there’s no statute of limitations for collections on federal student loans. This means that if you stop making payments, your lender or a debt collector can sue you to force repayment regardless of how long ago 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 fees 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. This can cause a number of things to happen, including loan acceleration (meaning your entire balance becomes due) and your loan getting sent to collections, which can damage your credit score and lead to additional fees from a collection agency.
Additionally, the federal government may decide to withhold your tax refund or even garnish wages directly from your paycheck. Your loan holder can also sue you to force you to pay up.
Why Private Student Loans May Expire
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 stopped engaging with your lender.
Before you cancel your monthly payments, it’s 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 student loan default. When you default, you may face negative impacts to your credit score, and you may still end up dealing with collection agencies, plus any additional fees they may charge.
One Way You Can Get Rid of Student Loans
You can technically get rid of federal student loans in bankruptcy. However, doing so is extremely rare.
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. This 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 years old, your federal student loans will not just automatically expire after a period of non-payment — and failing to pay has some serious consequences.
Alternative Options to Manage Student Loan Debt
Just because federal student loans don’t expire doesn’t mean there aren’t other ways to manage your student loan debt. Here are a couple of other options you might explore.
Public Service 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’ll 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.
Student Loan Refinancing
Another option to save money on your student loans is student loan refinancing. Loan refinancing doesn’t change the underlying amount that you owe. However, it may reduce the amount of money you spend on interest and 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. 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. Just know that if you’re working toward PSLF, refinancing with a private lender will disqualify your loans from this and any other federal program.
If you’ve been waiting around for your federal student loans to expire, you’re out of luck — federal student loans don’t expire. While private student loans may expire due to their statute of limitations, your debt won’t just disappear when this happens. Your finances will also suffer in the meantime.
This is why it’s important to look into other ways to manage your student loan debt, such as student loan refinancing. When you refinance student loans 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.
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.
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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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.