The Eternal Pursuit to Collect: Due Process Rights and Actions to Collect on a Debtor’s Defaulted Student Loans

Contributed by Melissa Siegel
As we’ve previously covered in prior blog posts, Being In Love Means Never Being Able To Get Your Student Loans Discharged, Or Why Stedman Graham Should Have To Pay His Student Loans and Are You Ready for Some (Fantasy) Football? Or, Why Fantasy Football May Help You to Discharge Your Student Debt, student loan debt is generally nondischargeable in bankruptcy, absent a showing of undue hardship.  In another blow to student loan debtors, courts have consistently upheld Congress’ elimination of statutes of limitation to collect upon certain student loans.  
Recently, the Ninth Circuit affirmed a district court’s grant of summary judgment to the United States, upholding the government’s right to collect unpaid federally insured student loans.  In U.S. v. Falcon, the Ninth Circuit evaluated whether Congress’ elimination of the statutes of limitation on actions to recover on defaulted federally guaranteed student loans violated a student loan debtor’s due process rights.
The Loans, the Default, and the Action
About thirty years ago, the individual debtor, Mark J. Falcon, signed a series of promissory notes to secure guaranteed student loans. The loan obligations were guaranteed by a guaranty agency and the guarantor was reinsured by the U.S. Department of Education.  Falcon defaulted on his loans, the guaranty agency paid the holders of the loans, and the Department of Education reimbursed the guaranty agency.
Years later, the government filed suit against Falcon to recover the principal and interest on his defaulted loans.  The district court granted summary judgment in favor of the United States.  Falcon moved to alter or amend the judgment, raising a constitutional argument that Congress’ elimination of the statute of limitations for federally guaranteed student loan collection actions violated his due process rights.  After the district court denied Falcon’s motion, he appealed to the Ninth Circuit.
HETA and Eternal Indebtedness
The Ninth Circuit’s analysis focused on the Higher Education Technical Amendments of 1991, commonly referred to as “HETA,” which eliminated all statutes of limitations on actions to recover on defaulted federally guaranteed student loans.  Falcon argued that HETA violated his due process rights, because it created eternal indebtedness for a class of borrowers, generated oppressive effects, and created a special hardship.
The Court looked to other circuits that have held that HETA’s retroactive abrogation of statutes of limitation does not violate a student loan debtor’s due process rights.  The Ninth Circuit agreed.  The Court explained that because HETA did not resuscitate an otherwise time-barred action to collect on Falcon’s debt and because the government’s action would have been timely even under the prior six-year statute of limitations period, Falcon’s due process rights were not violated.
Falcon, and student loan debtors everywhere, might be disappointed by the Ninth Circuit’s decision.  By upholding HETA and ruling against Falcon, the Ninth Circuit further bolstered the government’s right to collect on federally guaranteed student loans without heeding to a statute of limitations period, thus perhaps creating, in the words of Falcon, “eternal indebtedness.”