Question:
Dear Steve,
I am currently a full time PhD student. During my undergraduate and Master’s degree programs I acquired both federal and private student loans. Since I’m in school my federal loans have not entered repayment. However, my private loans are a different story. I have private loans through CUStudentLoans/ECSI and AES.
Prior to starting my doctoral program I wrote to both companies informing them of my situation and letting them know that i was unable to continue making payments. As with most private loans they refused and stated that I was to make payments regardless. Due to my lack of income I was unable to make any payments. After several months of nonpayments (approx. 6 months) ECSI sent an email informing me that they placed my loans in deferment where the interest was accruing. The monthly payments have now ballooned to about $600 a month. I am still unable to make payments. I won’t complete my degree program for another 4 years at least. I have started to receive notices from them once again.
My questions are: 1) Do they have the legal right to place my loans in deferment after they denied my request? I did not sign any agreement or contract with them about it. 2) Are they still held to the statute of limitations? While I took the loans out to attend school in NYC (I was a CT resident), I now live in Maryland where the statute of limitations is 3 years?
Thank You!
Frances
Answer:
Dear Frances,
Congratulations on your educational efforts. And that you for making my day by sending in such a well written question.
So the statute of limitation defense is a good one, but problematic. It’s not one you can use proactively or to eliminate your debt. It is a defense to be raised if you are actually sued.
But before relying on that as a defense I would certainly urge you to speak with an attorney licensed in the state where you report to the servicers that you live. One place to find a consumer advocate attorney is here.
What the private lender can or can’t do is going to be spelled out in the terms you signed with the loan. I do think it is interesting that the loan was placed in deferment. I hate to be cynical but I wonder if they did that to prevent having to report the loan as not performing and starting the statute of limitation clock.
Here is the bottom line, you’ve stated you can’t afford to make the loan payments so you either need to drop out of school, make money and repay the loans or just face whatever may come by not paying.
If you happen to get sued over not paying, hire a lawyer in your state to negotiate a settlement or reduced payment plan. Ironically, getting sued by a private student loan lender is a great opportunity to reduce your balance or payment.
And as you’ve observed, your balances will increase on your private loans while they are deferred or in default.
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Frances, just answered your question.