What Happened When I Stopped Paying My Private Student Loans

When the Supreme Court struck down President Biden’s plan to cancel up to $20,000 in federal student loan debt in June, I was one of 43 million people whose financial future took a hit. I had $10,459 in federal loans at stake.

In a coincidence of timing, I was no longer on the hook for the other half of my student loan debt — private loans I had defaulted on, totaling about $12,700. They were now uncollectable: outside the reach of debt collectors and the monstrous assemblage of complex financial instruments that claimed to own it.

The statute of limitations to sue to collect a debt in Pennsylvania is four years. I had waited it out. From my understanding, after speaking with a credit counselor and a few lawyers, the loans still exist on paper, but the entity that owns my debt had lost the only way to forcibly obtain the money, in court.

The National Collegiate Student Loan Trusts, one of the country’s largest owners of private student loan debt, has always shown a perplexing disinterest in the money it said I owed it. It has never attacked my credit score and its debt collectors, in the years since I had defaulted, called rarely and only sent me letters biannually.

I didn’t plan for any of this to happen, and this isn’t something you can plan on happening to you. Despite the statute of limitations, National Collegiate could try to sue me anyway. But my story reveals how broken our student loan system is and how the endgame for many people’s loans will be full of arbitrary results.

The consequences of student loan default do not follow predictable patterns. “There is no typical,” said Joshua Cohen, an attorney in St. Albans, Vt., who specializes in student loans. But the repercussions can be devastating, leading to a pummeling to one’s credit score, relentless calls from debt collectors or a lawsuit.

I graduated from the University of Pittsburgh in 2005 with a bachelor’s degree in English writing and $42,207 in debt. In the years that followed, I paid about $370 a month on the loans while working at newspapers and as a freelance writer, paying a total of $57,347 — or 136 percent of the original balance.

In 2019, the balance stood at about $22,000. At the pace I was paying, the loans would be paid off in 13 years with a 250-percent return for the loan servicers. It was a depressing halfway point.

That year, some regular sources of writing work dried up. I struggled to make up for them and fell behind on payments. After six months of nonpayment, the private loans went from a servicer to a debt collector. (A silver lining of my very bad year was that my federal student loans were on an income-based repayment plan, and those payments dropped to $0 a month.)

The first letters from a debt collector came in February 2020.

I tried to stay on top of my finances and signed up for free sessions with a credit counselor at a local nonprofit.

Like many pandemic-era relationships, I’ve only known my credit counselor as a voice on the phone, but she quickly became a de facto therapist — with whom I was most honest with all my fears and shame. She was warm and open. She shared her own struggles finding a career with a history degree.

During our first session, she ran my credit. My scores took a hit when my original student loan servicer, American Education Services, reported late payments. But the loans had not been reported as in collection.

“Let’s just monitor it,” she said.

Three years went by. The private student loans are technically two loans and every six months, I got a pair of letters from a collection agency announcing its intent to collect.

I always responded with a variation of a sample letter from the Consumer Financial Protection Bureau, which denied responsibility for the loans while politely obligating the collection agency to provide information proving their validity. It sometimes replied by mailing me copies of promissory notes from 2003 or 2004, with paperwork that claimed to show the chain of custody of the loans. Other times, it didn’t reply at all.

Sending these letters was a stalling tactic the first time, but then I kept sending them because something was working. Nothing would happen, and then the six-month cycle would start again.

Whenever the collectors called, I asked for all communications in writing, per the credit counselor’s recommendation. Collectors contacted my father, the co-signer on my loans, even less. He didn’t respond to letters and grumbled with them to bug off on the phone.

After conferring with her colleagues, my credit counselor said the best option might be to wait for the statute of limitations to expire.

Ninety-two percent of the nation’s $1.7 trillion of student debt is government-owned, putting it under a slate of protections and benefits, like income-based repayment plans, forgiveness for people working in public service and the payment moratorium during the pandemic.

Private loans provide no such mercies, but they have an upside: Unlike federal loans, they are subject to a state’s statute of limitations, like any contract. If the borrower does not pay, the loan owner has a limited window of time to make good on the threat of legal action (three to 15 years, depending on the state, and the owner can file suit in the state where the loan was taken out or where the person lives).

Now that the statute has passed, nothing happens to the loan. I just know that if I am ever sued, I’ll have a golden shield.

To confirm why this happened and what my legal protections are, I talked to five lawyers, another credit counselor and three people who work at student loan-related organizations. Their consensus was: Who knows?

“Some sue, some don’t,” said Mr. Cohen, the attorney specializing in student loans. “Some have an unknown formula to decide which folks get sued.”

Alan Collinge, the founder of Student Loan Justice, an advocacy organization, theorized that, as a freelance writer with “not a huge reportable income, I suspect they passed you over and moved on to more lucrative targets.”

Others pointed to the history of the National Collegiate Student Loan Trusts.

National Collegiate has no headquarters or employees, just claims on hundreds of thousands of student loans. The entity exists only on some Delaware incorporation paperwork. Other investors and funds earn money from it. The collection agencies that actually deal with debtors are subcontractors.

For my private student loans, I borrowed from PNC Bank, a familiar name in the Pittsburgh region. They, like countless other banks, sold bundles of student loans to this blank-faced phantom.

National Collegiate was once fast with lawsuits against debtors, but in 2017, the Consumer Financial Protection Bureau sued it and its primary debt collector, Transworld Systems, accusing them of cramming student loans through the collections process without the paperwork to back their claims on the loans, using “false and misleading” statements. This forced National Collegiate and Transworld Systems under a compliance agreement that may have complicated their suing patterns.

“I suspect your loans may have been in this group,” Betsy Mayotte, the president of The Institute of Student Loan Advisors, a nonprofit, said. “So yep; you got lucky and yes, it’s rare.”

There is no nationwide data on student loan lawsuits. Around me, at least, National Collegiate is suing a lot less. I searched for cases through the Pennsylvania judicial branch’s portal. In Allegheny County, National Collegiate filed 26 lawsuits in 2016. That dropped to 11 in 2017. It filed none in 2021 and four in 2022.

Talking to someone at National Collegiate was complicated, since it doesn’t have employees. For comment, I emailed three financial services companies that, according to paperwork, have some role in the trust — the Wilmington Trust, U.S. Bank and the Cognition Financial Corporation. I also sent a message to Transworld Systems, which, in lawsuits against National Collegiate, seems to be the decider on how to deal with legal matters. I only received a response from a representative for U.S. Bank, who referred me to Transworld.

I called a debt collector, from Transworld, who had once left me a voice mail message. When I asked what would eventually happen to my loans, he said, “collection will continue” and offered a lump sum settlement of 40 percent of one loan, which, apparently, was still in the hands of Transworld.

It felt like a trap: The clock on a statute of limitations restarts if you pay anything toward the debt. Is 40 percent worth giving up my golden shield? Should I even trust him?

There are other possible pitfalls. Adam S. Minsky, another lawyer focusing on student loans, told me that some loan holders ram through lawsuits even after the statute has expired.

“In many cases, the person who’s being sued doesn’t show up,” he said. “I guess it’s fairly common. The person in this situation has just stopped checking their mail, has become overwhelmed by it.”

No one I spoke with had even a theory about why none of the debt collectors for my loans filed a complaint with a credit reporting bureau. My score is currently a respectable 720, and I’ve been dreading a potential 100-point drop for years.

My credit counselor said that after passing the statute of limitations, I should focus on other financial goals: savings, a retirement account, budgeting — concepts that have been swiped from the vocabularies of the masses saddled by unmanageable student loan debt. And that’s what I will do.

After all I have paid, in dollars and stress, over student loans, I don’t feel any moral obligation to pay them. I will use the increasingly generous federal programs to pay as little of the federally owned portion as I can and wait for a political solution to emerge.

Still, it’s hard to shake the dread that kept me paying more money than I originally owed for 13 years, and the silence coming from the other end of the student loan-industrial complex is more eerie than comforting. But I am lucky, and not any more deserving of this than anyone else who got hammered by the system.