What happens if your student loan payment is late?

Missing student loan repayments could have unintended financial consequences. (iStock)

Keeping up with student loan payments could put a strain on your budget, especially if your income has been affected by the coronavirus pandemic.

While the CARES Act provides financial relief to borrowers with federal student loans – including student loan forgiveness and 0% interest rates – these measures won’t last forever. And the law does not provide any relief for those with private student loans who may have been affected by COVID-19.

For those with private student loans (and only private student loans at this point, since the benefits associated with federal loans are different), refinancing may make sense. An online tool like Credible can be handy for comparing student loan refinance rates from several lenders without affecting your credit score..

Lack of student loan repayments, whether for federal or private loans, can hurt your credit score and make it difficult to obtain new loans to finance your education. Here’s what can happen if you fall behind on school loans, plus tips on how to avoid it.

What if I am late on federal student loan payments?

If you have federal student loans covered by the protections of the CARES Act, you don’t have to worry about being late just yet. Thanks to President Biden’s decree issued in January, forbearance from student loans and 0% interest rates are extended until September 30, 2021. The law also stops collection actions on overdue loans.

Coronavirus relief for federal student loans may continue after that date if another executive order is issued. But if it doesn’t, you must be prepared to start repaying your loan again.

What will happen if a borrower is a few days late on their payment?

The first day after you default on a loan, you are considered past due. You will remain in delinquency until you make a payment or otherwise address your loans. For example, you can get back on track by consolidating loans, requesting income-based repayment plans, or requesting a deferral or forbearance.

Loan managers likely won’t report your account as overdue to the credit bureaus if you’re only a few days late. But you may be charged late fees.

What will happen if a borrower is 90 days or more late on their payments?

If you’re 90 days or more behind on federal student loan repayments, loan managers can report you to the credit bureaus. It could hurt your credit score.

The more late you are on student loan payments, the closer you get to defaulting. For federal student loans, the default occurs when you pay 270 days or more.

At this point, your entire loan balance becomes due immediately, you can no longer qualify for a deferral or forbearance, you become ineligible for new federal student assistance, and you cannot apply for loan plans. income-based reimbursement. Your wages could also be garnished and your tax refund could be offset to collect what is owed.


What if I am late on private student loan payments?

Private student loans do not follow the same rules as federal loans when it comes to late payments. The consequences of late payment for private student loans can vary from lender to lender. But generally, you may be subjected to any of the following:

  • Late payment fees
  • Negative reports to credit bureaus
  • Loss of borrower benefits or incentives, such as interest rate discounts for automatic payments
  • Loss of eligibility for new private loans or forbearance / deferral options

If you are at risk of falling behind on private student loan payments, it is important to contact your lender or loan manager as soon as possible. They can discuss the options available to stay up to date on your loans.


What should I do if I need help repaying my private student loans?

If you’re struggling to keep up with private student loan repayments, there is a potential solution: student loan refinancing. You can use Credible to compare student loan refinance rates from several lenders at once without affecting your credit score..

Private student loan refinancing allows you to replace your existing loans with a new one, ideally at a lower interest rate. Lower rates can mean lower payments and save you money on interest for the life of the loan.

The suitability of refinancing for private student loans may depend on your loan balance, whether you currently have fixed interest rates or variable interest rates, and your credit history. On the benefit side, refinancing can lower the total cost of borrowing to pay for school. However, if you have already paid off most of your school loans, refinancing them may not generate significant savings gains.

Before refinancing private student loans, it is important to first estimate your monthly payments and savings using a online refinancing calculator. This can give you an idea of ​​the relevance of refinancing from a numbers perspective.

From there, you can check your rates with different lenders to compare loan options. It’s easy to do this using an online tool like Credible, where you can display a rate table that compares the rates of several lenders at the same time.


Have a financial question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question can be answered by Credible in our Money Expert section.

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About Louis Miller

Louis Miller

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