How Long Does Student Loans Stay On Your Credit
Student loans are often a financial burden that can stay with you for years. If you’re in the process of trying to get out from under that debt and need to know how long student loans stay on your credit report, read on.
How Long Student Loans Stay On Your Credit Report
Student loans are typically considered public record, which means they will be present on your credit report for up to seven years after you’ve graduated. This is true even if you don’t make any payments during that time period. These loans will be reported as “in collections” and will take up around 10% of your overall credit history score.
You can still improve your credit score by making timely payments, even if they’re minimal amounts. Paying off all of your student loans will help build good credit over time by showing lenders that you have a track record of paying back money that was borrowed to you.
How Long Does Student Loans Stay On Your Credit
Applying for federal student loans doesn’t show up on your credit report until you actually take out a loan.2 You may decide to shop around for private student loans; however, if you still need additional funds beyond federal student loans to pay for your college expenses.
Hard inquiries are reflected on your credit report, so make sure that a private lender only does a soft inquiry when giving you a rate quote. You can submit a full application after you’ve done some comparison shopping. It’s worth noting, however, that most inquiries won’t impact your score by more than about five points, so they shouldn’t significantly affect your credit.3
Your student loans will usually show on your credit report while you’re still in college and still technically in deferment.4 But this doesn’t typically have a dramatic effect on your ability to get non-educational loans because many lenders are more interested in your current monthly payment obligations than your actual loan balances. Your monthly payment obligations should be zero while you’re still in school.
When Do Student Loans Have a Negative Impact?
As with any loan, making late payments can impact your credit. Your delinquency won’t be reported to the three major credit bureaus until you’re 90 days delinquent on a federal loan, so you have a little time to catch up if the situation is very temporary or if a missed payment was an oversight.
It’s considered to be in default once your loan payment has been delinquent for 270 days.5 A student loan default could remain on your credit report for seven years. It can take years to reestablish good credit when your loan goes into default. The government can garnish your pay and withhold any federal income tax refund you might have counted on to get out of the situation.6
There are also some federal benefits you might not be eligible for if you’re in default. Talk to your servicer about rehabilitation options so you can reposition yourself to take advantage of programs and protections available to borrowers.
Private lenders aren’t required to follow the same guidelines as federal student loan servicers, and they might not wait 90 days to report a missed payment. They might also have different guidelines for default. Each private lender is different, but it can begin pulling down your credit score as soon as it starts reporting missed or late payments.7
What If You Can’t Pay Your Student Loans?
It’s not unusual to have problems repaying your loans once you’re out of college and you’ve entered the workforce (or are trying to do so). You have options if you’re having trouble making your loan payments at this time.
Income-Driven Repayment
Consider income-driven repayment. You might be able to shift to a plan that allows you to make payments based on your income if you have qualifying student loans, including reducing your required monthly payment to zero for a while.
Each payment is considered paid “as agreed” when you’re on income-driven repayment. Payments made while on one of these plans also “count” toward the 120 qualifying payments needed to obtain Public Service Loan Forgiveness.8
Deferment or Forbearance
Depending on your personal situation, you may be eligible for temporary deferment or forbearance to lighten your student loan burden.
Both a loan forbearance and deferment will allow you to stop making payments for a certain amount of time or reduce your payments temporarily.
In most cases, interest will accrue during your period of deferment or forbearance (except in the case of certain forbearances, such as the one offered as a result of the COVID-19 emergency). This means your balance will increase and you’ll pay more over the life of your loan.9A deferment or forbearance doesn’t hurt your credit score because it’s considered “paid as agreed.”1011
Double-check the conditions of your deferment or forbearance so you understand when the situation ends and when you’re expected to resume making payments.
Some private student lenders also offer forbearance programs, but they vary by lender and there are no uniform standards.12 Contact your lender as soon as possible if you’re having trouble paying your private student loans to see what types of arrangements they have for borrowers facing hardship.
Loan Consolidation
It can be confusing and it may look messy on your credit report if you took out multiple student loans during your college years. You may be more likely to miss a payment because your various loans have different payment due dates and amounts.
It may be helpful to use a direct consolidation loan for your federal student loans in this case so you only have to make one monthly payment. Direct loan consolidation might also extend your payment period, making your monthly obligation more affordable and easier to manage.
Refinancing
It’s also possible to refinance your student loans. Refinancing makes use of a large private loan to pay off your smaller loans. You can refinance federal student loans using a private student loan, but you lose access to programs like income-driven repayment and federal loan forgiveness once you do.13
Refinancing your federal student loans into private student loans may not be the best idea because you could lose certain protections. Borrowers who refinance their federal student loans into private student loans could miss out on the waiver of federal student loan payments and interest that’s in effect until Aug. 31, 2022, due to the coronavirus pandemic.14
Consider using direct loan consolidation for your federal loans and refinancing any private loans you have. Refinancing before you start missing payments can help you lower your interest rate if you have good credit. It can extend your loan term, and potentially reduce your monthly payment so it’s more manageable.
The Department of Education extended the waiver of loan payments and interest on privately held Federal Family Education Loan (FFEL) borrowing. FFEL loans are no longer being issued, so this relief applies only to existing loan holders. Any payments made retroactively to March 13, 2020, when the pandemic crisis was declared, will be returned to loan holders.15
Forgiven loans are typically treated as taxable income by the Internal Revenue Service. But they’re tax-free if they’re forgiven between 2021 and 2025, thanks to the American Rescue Plan Act of 2021.16
The Bottom Line
Both federal and private student loans are included in your credit report, so it’s important to pay attention to them and make your payments on time and in full whenever possible.
The worst thing you can do is ignore your loans when you can’t pay them. Missing payments will eventually catch up with you and negatively impact your credit score, affecting your ability to make better financial choices in the future. Contact your loan servicer or lender as soon as possible to review your options if you’re experiencing economic hardship and struggling to make your payments.
do student loans affect mortgage
With current mortgage rates at historic lows, you may want to consider buying a home soon if you are ready to take that step. But if you have student loan debt, you may be wondering whether it could affect your ability to get a great deal on a mortgage, or even to buy a home at all. While it is true that too much existing debt is likely to affect your interest rate and even whether you qualify for a mortgage, in most cases you can – and should – still consider buying a home if you are ready.
Student loans don’t affect your ability to get a mortgage any differently than other types of debt you may have, including auto loans and credit card debt. When you apply for a mortgage, your lender will assess all of your existing monthly payment obligations, including student loans, to determine whether you would be able to manage the additional monthly payment. Depending on your situation, the lender will decide whether you qualify for the new loan, and if so at what interest rate.
For that reason, you should consider how both your monthly student loan payment and a hypothetical mortgage payment could affect your debt-to-income ratio and overall credit score before you apply for a mortgage. In other words, if you have any existing debt, you need to be careful that you will be able to manage all your monthly payment obligations with your current income.
This calculation varies a bit depending on the type of mortgage loan you choose.
Potential homebuyers can choose between a conventional mortgage from a private lender, like a bank or other financial institution, or an FHA loan, which is a mortgage backed and insured by the Federal Housing Administration for people with limited savings or lower credit scores. This backing enables the lender to offer you a better deal, which typically includes a lower minimum down payment and easier credit qualifying. Recent changes to the way lenders must calculate monthly student loan payments can make the FHA loan a more attractive option for those with student loan debt, particularly first-time homebuyers.
As you consider the options, here are some things you need to know about your debt-to-income ratio and credit score.