Statute of Limitations on Co-Signing Student Loans

The statute of limitations is a legal principle that prohibits a plaintiff from filing a civil action in court beyond a specified period of time after his cause of action initially accrued. Each state establishes its own limitations period for each distinct legal cause of action such as negligence, fraud and breach of the terms of a student loan contract. A civil action filed outside the designated limitations period is considered time-barred and may be dismissed by the court.

Actions for Breach of Contract

Since the obligation to repay a debt is based on the existence of a legally binding contract between the lender and the borrower, the relevant statute of limitations period that governs student loans would be that period established for breach of contract actions.

Differs by State

The statute of limitations period for breach of contract actions varies from state to state. For example, the limitations period for written contracts in Colorado is six years, in Delaware, it is three.

Timing

The limitations period begins on the date the cause of action for breach of contract accrued, which would be the date on which the borrower defaulted on the repayment terms of the loan obligation. The period ends on the day a complaint is filed in court. If a lender files suit against the borrower but omits to name the co-signer as a defendant to the action, the statute of limitations clock continues to run as against the co-signer.

Effects

The existence of a co-signer on the student loan has no bearing on when the statute of limitations has expired. If the lender does not name the co-signer as a co-defendant to the lawsuit when it files suit against the borrower, the statute of limitations clock continues to run on any future actions the lender may file against the co-signer.

Considerations

Since the co-signer has liability for the full amount of the loan, once a borrower defaults, most lenders will name both the co-signer as well as the borrower as defendants in their lawsuit for repayment. If the complaint was filed within the applicable limitations period, neither the borrower nor the co-signer can raise the statute of limitations as an affirmative defense. If the lender decides at a later date to file suit against the co-signer after having previously filed suit against the borrower and the applicable limitations period has then expired, the lender is absolutely barred from filing suit against the co-signer.