Abandon hope, all ye who enter here.
Dante Alighieri
Awhile back, Governor Jerry Brown vetoed a bill passed by the California legislature that would have expanded the statute of limitations for bringing sexual abuse lawsuits against private schools, including schools operated by the Catholic Church. The law did not apply to sexual abuse claims against public school teachers.
 |
| Cartoon Credit: Carol Simpson |
In vetoing the statute, Governor Brown invoked ancient principles of fairness that put time limitations on lawsuits. "Statutes of limitation reach back to Roman law and were specifically enshrined in the English common law by the Limitations Act of 1623," Governor Brown wrote in his veto message. "Ever since, and in every state, including California, various limits have been imposed on the time when lawsuits may still be initiated. Even though valid and profoundly important claims are at stake, all jurisdictions have seen fit to bar actions after a lapse of years."
Statutes of Limitations Invoke Ancient Principles of Fairness
Governor Brown correctly stated the law regarding statutes of limitations. It is not fair, as the courts sometimes put it, for aggrieved parties to “sleep on their rights” and then file a lawsuit long after a claim has grown stale, when memories and witnesses may have faded away and critical documents may have been lost. Thus, all states give claimants a specific time limit for filing a lawsuit. If the claimant fails to file within the time limit, the claimant irrevocably loses the right to seek a remedy in court.
Unfortunately for student loan debtors, these ancient
principles of fairness do not apply to student loans. In 1991, Congress passed 20
U.S.C. § 1091a, a statute that abolished all limitation periods that might otherwise
apply against specified lenders and governmental entities that seek to collect
on student loans. As one scholar succinctly summarized the law, “[O]nce a
student contracts for a student loan, the student cannot use a statute of
limitations as a defense against collection on that loan by the entities listed
in the statute—ever” (Roper, 2005, p.
37, emphasis supplied).
The Fabrizio
case: Student-Loan Guarantor Attempts to Collect a 25-Year-Old Judgment
In 2010, this harsh federal law was applied in a case
against Anthony Fabrizio, who borrowed about $9,000 in the early 1970s to help
pay for his postsecondary education (New
York State Higher Education Services Corporation v. Fabrizio, 2010). Apparently,
Fabrizio did not pay back the money, and the lender obtained a default judgment
against him in 1983 for $9,664.63. In 2008, twenty-five
years after the debt had been reduced to judgment, the New York State
Higher Education Services Corporation, which (through a predecessor agency) had
guaranteed Fabrizio’s loan, told Fabrizio to begin paying off the debt or the
agency would start garnishing his wages.
Fabrizio tried to persuade a New York court to enter an
order declaring that his debt was deemed paid under a New York law stating that
a money judgment is presumed to have been paid after 20 years from when the
creditor was first entitled to enforce it.
Unhappily for Mr. Fabrizio, a New York appellate court ruled
against him, finding that 20 U.S.C. 1091a, abolishing all statutes of
limitation that might otherwise protect a defaulted student-loan debtor,
overrode the New York statute of limitation.
Fabrizio can still be made to pay back the loan. Presumably, he is also
liable for collection fees and more than 30 years of accumulated interest.
Defaulting
Student Loan Debtors Have No Place to Hide
Today, there are millions of people who have defaulted on
their student loans, and some of those loans are now quite old. Nevertheless, student-loan
defaulters are never off the hook for their debt--no matter how old that debt
might be.
As the Fabrizio
case illustrates, statutes of limitation do not apply to student-loan debts
that are guaranteed by the federal government, and a lender can pursue
collection at any time, even if the lender took no action for a quarter of a
century.
Moreover, unlike most other overburdened debtors, student-loan
debtors cannot discharge student loans in bankruptcy unless they can show that
failure to discharge their student loans will cause them “undue hardship” (11. U.S.C. § 523(a)(8)(B)). As several
scholars have observed, it is very difficult for student-loan debtors to
discharge their student loans in bankruptcy--even in heart-rending
circumstances (Pardo & Lacey, 2009, Fossey, 1997).
In fact, student-loan debtors who fail to repay their loans
can have their Social Security checks garnished, a practice that the Supreme
Court approved in the 2005 decision of Lockhart
v. United States. People who took
out student loans in their early twenties and never paid them back can see their
Social Security income diminished by their failure to discharge their student-loan
obligations (Cloud, 2006).
Abandon
Hope, All Ye Who Enter Here
For millions of college students, the federal student loan program
has become a nightmare. Over the years, Congress has passed harsh legislation
that has stripped student-loan debtors of traditional legal protections like
statutes of limitation and unfettered access to the bankruptcy courts. As a result, for individuals who default on
their student loans, even those who took out their loans in good faith, the
famous passage from Dante seems chillingly appropriate: “Abandon hope, all ye
who enter here.”
**********
Note: Parts of this essay were taken from an essay originally published in 2010 in Teachers College Record. The citation for the original article is Richard Fossey & Robert C. Cloud, Abandon Hope, All Ye Who Enter Here: Defaulting Student Loan Debtors Have No Place to Hide. Teachers College Record, October 12, 2010 at http://www.tcrecord.org, ID Number: 16195.
References
Chae v. SLM Corporation, 593 F.3d
936 (9th Cir. 2010).
Cloud, R.C. (2006). Offsetting
Social Security benefits to repay student loans: Pay us now or pay us later, Education
Law Reporter, 208, 11-21.
Fossey, R.
(1997). "The certainty of
hopelessness:" Are courts too harsh toward bankrupt student loan
debtors? Journal of Law and Education, 26, 29-48.
Garner, B. A. (Ed.). (9th
ed. 2009). Black’s Law Dictionary.
St. Paul, Minn.: West Publishing Company.
Lockhart v. United States, 546 U.S.
142 (2005).
Joseph Mack (2006). Nullum Tempus:
Governmental immunity to statutes of limitation, laches, and statutes of
repose. Defense Counsel Journal, 73, 180-196.
New York Higher
Education Services Corporation v. Fabrizio, 900 N.Y.S.2d (A.D. 3 Dept. 2010).
Raphael I. Pardo & Michelle R. Lacey (2009). The real student-loan
scandal: Undue hardship discharge litigation. American
Bankruptcy Law Journal, 83,
179-235.
Glen E. Roper (2005). Eternal student loan liability: Who can sue under 20 U.S.C. 1091a? Brigham Young University Journal of Public
Law, 20, 35-78.
