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How to handle a late student loan payment

Note that the student loan situation has changed due to the impact of the coronavirus outbreak and relief efforts by the government, student lenders and others. Discover our Student Loan Hero Coronavirus Information Center for news and additional details.

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You missed paying off a student loan. Maybe the month has flown by, or maybe money is especially tight. Now is the time to settle that late student loan payment and get it right. After all, missing a payment can have serious consequences if you don’t act quickly.

Here’s what you need to know:

What happens when you’re behind on your student loan payments

The timeline for processing a late student loan payment varies from lender to lender. If you are dealing with a private student loan, your loan agreement should explain the process. Similarly, the Department of Education explains on its Federal Student Aid website how late payments are handled.

As soon as you miss a payment, your student loan status changes from “pending” to “overdue”. You will not be “current” again until you take action by making that payment or requesting a deferral or forbearance.

In fact, recent data showed that about 11% of federal student loans were 90 days or more past due. If you are late on a student loan payment, you need to act quickly because there could be major consequences.

Late fee for a missed student loan payment

During the first month of a missed payment, you may be charged a late payment penalty. When this happens – and how successful you will be – depends on the loan officer.

For example, a student loan payment of $400 can result in a 5% late fee after 30 days, which means you could owe up to $20 more. And late fees continue to accrue as long as your account is overdue.

Late student loan payments and credit score

A late student loan payment could cause your service agent to report the default to all three major credit bureaus.

After 30 days

Some federal student loan officers may charge a fee as soon as you miss a monthly payment, while the policies of private lenders vary widely, so check with them if you think you’ll be late.

After 90 days

Repairers for federal student loans pay off after 90 days, while policy for private student loan lenders and servicers varies.

A late student loan payment on your file will lower your credit score and could affect your ability to get new credit (like getting a new credit card or car loan). If you have credit card debt, you may also see your interest rates go up.

In other words, that missed student loan could affect the rest of your debts.

After 270 days

After 270 days in arrears on a student loan, your federal student loan goes from ‘delinquent to ‘default’. Note that with private student loans, it can happen even sooner.

Defaulting on a student loan is a big deal. Unlike delinquency, default means your student loans are due in full, plus any accrued interest or fines and penalties (such as fees charged by collection agencies).

Late Student Payments and Wage Garnishment

Additionally, the government may begin garnishing your wages or even taking your tax return to cover the costs of your missed federal student loan payment. And, believe it or not, your student loan officer (federal or private) or collection agency could sue you.

If someone helped you get the loan, bad debts and defaults can also be extremely detrimental to the co-signer. Delinquency on a co-signed student loan can have a serious impact on the co-signer’s credit, and collections can come after them or their property to recoup the loss.

What to do when you’re behind on your student loan payments

No matter how late you are on your student loan payment, there are steps you can take to help remedy the situation:

  • Contact your lender or repairer and admit your mistake.
  • Inform them of any financial difficulties. If you have a late student loan payment due to a medical emergency, job loss, or other unforeseen event, your service agent or lender may be able to help.
  • Consider requesting a deferral or forbearance to potentially defer or reduce your payments depending on your situation.
  • If you have federal student loans, income-driven repayment plans are an option that could drop your monthly payment as low as zero
  • Consider a late payment cancellation program for student loans.

If you just want to put your student loan payment back on track, your service representative can walk you through the steps you’ll need to take, including any fees you’ll need to pay, much like a late payment forgiveness program. for your student loan.

How to Avoid Late Student Loan Payments

Late student loan payments happen. Whether you couldn’t pay this month or just forgot, it’s time to put some strategies in place that can help you avoid hassle again in the future.

Set up automatic payment

Your best course of action is to set up automatic student loan payments. Lenders love it when you sign up for automatic payments — so much so that they can offer a reduction in your monthly interest rate for signing up, usually by a quarter of a percentage point.

And if your credit has taken a hit due to a late payment on your student loan, having a consistent automatic payment can help your score bounce back faster.

Learn about payment deferral

If automatic student loan payments aren’t an option, consider changing your student loan maturity date to a date that matches your paycheck. Many student loan providers will give you this option.

Use calendar alerts and reminders

Another strategy is to simply organize your finances in a way that helps you better remember due dates. If you’re not good at keeping up with paper mail, sign up to receive eStatements or email notifications of your loan due dates. If you rely on your phone to keep your dates in order, set up calendar alerts (or even an alarm) that will consistently remind you when your payment is due.

Final Thoughts on Missing or Late Student Loan Payments

If you’re panicking about missing out on a student loan, don’t panic just yet. The sooner you realize and acknowledge your mistake, the sooner you can deal with your debt.

Letting a late student loan payment spiral out of control can have disastrous consequences for your money, your credit score, and your future. With the help of income-driven payment plans or other payment options like refinancing, you can find a plan that will work for you.

Christina Majaski and Sage Evans contributed to this report.

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