Many borrowers are concerned with the repercussions of missing student loan payments. Oftentimes, it is hard to say how long it may affect one’s credit because each loan program tends to operate differently from the next. Those with past due private student loans can expect the debt to appear as a typical negative mark on their credit score, eventually clearing from the credit report after seven years. The majority of federal student loans will also drop off after seven years as well.
The Perkins loan is a type of student loan—the only of its kind—that remains on your credit report until is completely paid off, regardless of the number of years. The Higher Education Act’s provision allows the Perkins loan to affect your credit differently than other types of loans. Colleges distribute the Perkins loan on an “as-needed” basis and the interest is deferred while the student is actively attending school.
It is required that all federal loans are reported to the three major credit reporting agencies but often this information is given voluntarily. The Department of Education, Guaranty agencies, federal student lenders and the Department of Education are also required to provide information pertaining to extended loans, remaining balances, and loan delinquency dates if the loan is past due or in default. While defaults and delinquencies are reported for seven years, this can happen multiple times, resulting in new negative marks that remain for seven years after each occurrence. Lenders are not required to report loans that have been paid on time, therefore positive payment histories will not likely be reported regularly.
There are solutions to help you protect your credit moving forward. If you are behind on your student loan payments, initiate a catch up plan. This can include repayment options such as an income-based repayment plan. Continuing to make on-time payments will reflect positively on your credit score and protect more damaging marks from arising due to missed payments. Often this results in the removal of default notations on your credit report. Certain lenders may cease reporting late payments if this is done.
For borrowers with multiple student loans, consolidation is a smart idea for simplified repayments. Consolidation does not alter the original late payment date of the loans, but consistent payments will help generate positive activity on your report, which will in time make the negative information have less of an impact. Additional ways to rebuild your credit report with positive information is to make sure you pay your credit cards on time and keep the balance low in relation to the credit limit, preferably less than 30%.
Every year you are entitled to a free credit report, directly from each of the three major credit reporting agencies. Make sure the information on your report matches your activity. If it does not, you can dispute it to have it possibly removed.
For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
