I have over $10K in outstanding debt to my old college. Due to an issue with my parents' tax return my final year of attending, my FAFSA was invalidated, and all financial aid (loans, grants, and scholarships) were pulled, leaving me with the full year's tuition for a private university owed in mid-2010.

Since that time, the school has apparently taken out a federal loan to "back" the debt (discovered during the process of getting a home loan, which disqualified me from getting approved for an FHA loan).


  • I know that federal student loans I take out never "go away" if unpaid and sent to collections, but what about this case?
  • Should this drop off my credit after 7 years, or is it here for good since the school took out a federal loan to back it? (2019 Edit: This did drop off my credit reports after the 7 year mark, shortly after posting this - credit score went through the roof. Its presence on my credit report was what started the "digging" process revealing the debt's federal backing, so I would actually expect to be able to get an FHA loan on my next home purchase at this point)
  • If the 7-year statute of limitations (Oklahoma) does apply to this (preventing them from coming after me with legal action), what marks the beginning of that 7-year period?
  • If the school is (incorrectly) reporting "late payment" on my account (when no payment has ever been made at all) to credit bureaus, is it a bad idea to file disputes to get this data corrected for credit score improvement?

The account status on my credit report still shows as "open". I did get contacts from 3rd party debt collection several years back (giving me only the option to pay half or all - no payment plan available), but the debt is still owned by the school and accruing interest.

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    I'm curious as to how the SCHOOL took out a federal loan (presumably in your name) after the fact. Was this outlined in your FAFSA paperwork as a provision? Or did you inadvertently agree to it at the time? Seems like kind of a major thing to have happened without your knowledge.
    – Keith
    Apr 27, 2017 at 3:54
  • Well, I don't think they took out a loan "in my name". The explanation I was given was that they took out a federal loan to "back" the debt, i.e. cover the financial loss on it. So I don't have a fed loan on that debt, but the debt does still have enough federal involvement to kill FHA qualification. Don't fully understand it honestly.
    – JimNim
    Apr 27, 2017 at 5:49
  • And it quite possibly could have been in something I signed during college... with parents promising to get taxes dealt with in time for FAFSA deadline, I just trusted it would work out. Didn't expect all aid to vanish
    – JimNim
    Apr 27, 2017 at 5:50
  • Another consideration beyond credit score is your ability to get transcript or diploma verification - some schools will not release your transcript if you have outstanding debt. May or may not apply to your situation, but could be an issue applying for a job or getting a background check.
    – user40002
    Apr 27, 2017 at 14:33
  • True. This situation actually prevented me from finishing my degree, so this may only prevent me from completing it elsewhere via obtaining a transcript.
    – JimNim
    Apr 27, 2017 at 14:35

1 Answer 1


You need professional help. If this is seen by the federal government as a federally backed student loan this can have repercussions beyond applying for credit and having a good credit score. Your ability to use federal programs can be limited (as you already found out) as can the ability to work for the government.

From a money standpoint you need to understand what you really owe, and to whom. You also need to understand what methods they can/will use to force payment of this debt.

  • Understood. In its infancy, this debt was simply un-payable for me. Now that I have a stable (and decent-paying) job and a home I'm building equity in, I fully expect I could manage to pay it off one way or another in the coming years if it becomes necessary. Thanks for the input!
    – JimNim
    Apr 27, 2017 at 14:30

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