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Six Laws with no Statute of Limitations

Adam R.'s picture

Posted April 26, 2012

There are only a few instances when the period when a perpetrator of a crime can be charged and convicted never expires:

  1. If you kill someone: A charge of murder can be made at any time.
  2. Fraud and embezzlement: You will be looking over your shoulder forever.
  3. War Crimes: If you commit a series of crimes against humanity - a la Slobodan Milosevic - then you will never be forgiven just because you have lived a long happy life.
  4. Kidnapping: Do not think you can get away with taking someone's children.
  5. Treason: Some of our famous spy cases have been prosecuted decades after the events took place. We never forgive

    treason.

  6. Not paying back your federal student loans. The power to collect on defaulted student loan debt is vast. It is virtually without limit. Outstanding student loan debts are one of the few instances where a collector can intercept social security benefits payments. Section 484A (a) of the Higher Education Act says that "t no statute of limitations bars enforcement action to collect Federal student loans, including collection by offset, lawsuit, or enforcement on student loan judgments."

Imagine the police lineup: next to the war criminals, murderers, white collar embezzlers, and baby snatchers would stand a grandfather of 70 that once made the mistake of co-signing on a student loan. Even if such a man is impoverished and if his co-signer has passed away, he still has to give up all but $900 of his Social Security check every month. You can easily spot him in the lineup because he is the one with the jar of Jiffy peanut butter and a collection of saltines bulging from his tattered coat pockets. Such an example is far from unusual. Earlier this month the Federal Reserve Bank of New York published a report which stated that American seniors (60-plus) still owe $36 billion on outstanding student loans. The statute of limitations on student loans can end with a private student loan - a fact that contradicts the prevailing notion that there is a dichotomous nature to student loans: private loans are bad and federal loans are good. Private student loans generally come with higher rates of interest, must be repaid earlier, and are generally far less lenient when it comes to repayment than are any of the loans originated or guaranteed by the government. However, private student loans are given the standard legal status of most types of unsecured consumer debt. True, issuers and servicers of these loans do benefit from the framework that makes them non-dischargeable in bankruptcy. Federal loans come with all kinds of special benefits which still make them a far better option than a private loan. Currently those loans qualify for Income-Based Repayment and Income-Contingent Repayment plans. Since 1997, borrowers that work at non-profits and that never fail to make their payments are able to have their debts extinguished after 10 years. Federal student loans (Stafford, PLUS, Perkins) are uniquely onerous with regard to their permanence. To quote Eddie Murphy, "that stuff is for forever." Neither type of loan is protected from being re-assigned to a private debt collection agency. Those collectors are still bound by all of the basic rules for any collection. But that does not mean that they go soft on delinquent borrowers.  The Education Department has come under some criticism for hiring private debt collectors that some people consider overly aggressive. Some of that critique focuses on their loan rehabilitation incentive program. Under its framework, a debt collection agency gets a hefty portion of any repayments if they can convince a debtor to make nine payments in ten months of at least 0.75 percent of the outstanding amount. Even a Social Security benefit is not exempt from the collection of a federal student loan debt. If a delinquent borrower fails to repay all of their debt or prove that they do not owe the debt within 65 days of notice, Treasury can offset a Social Security check. It is the same as with any future tax refund or federal benefit in order to make up the outstanding obligation. They can even take a refund derived from overpayment of taxes on the income of your spouse.