What happens if your student loan payment is late

Missing student loan payments 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 offers financial relief for borrowers with federal student loans--including temporary student loan forbearance and 0% interest rates--those measures won't last forever. And the Act doesn't 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 benefits associated with federal ones are different), refinancing may make sense. An online tool like Credible can be handy for comparing student loan refinancing rates from multiple lenders without affecting your credit score.

Missing student loan payments, either for federal or private loans, can damage your credit score and make it difficult to take out new loans to finance your education. Here's what can happen if you fall behind on school loans, along with tips on how to avoid it.

What happens if I'm late on federal student loan payments?

If you owe federal student loans that are covered by CARES Act protections, you don't have to worry about being late for now. Thanks to President Biden's executive order issued in January, student loan forbearance and 0% interest rates are extended through September 30, 2021. The Act also halts collection actions on loans in default.

It's possible that coronavirus relief for federal student loans may continue after that date if another executive order is issued. But if it isn't, you should be prepared to resume making loan payments.

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

The first day after a loan payment is missed, you're considered delinquent. You'll remain in delinquency status until you make a payment or address your loans in some other way. For example, you may get back on track by consolidating loans, applying for income-based repayment plans or requesting deferment or forbearance.

Loan servicers likely won't report your account as delinquent to the credit bureaus if you're only a few days late. But you may be charged a late payment fee.

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

If you're 90 days or more late on federal student loan payments, loan servicers may report you to the credit bureaus. This could hurt your credit score.

The longer you're behind on student loan payments, the closer you get to default. For federal student loans, default occurs when you're 270 days or later on payments.

At this point, your entire loan balance becomes due immediately, you can no longer receive deferment or forbearance, you become ineligible for new federal student aid and you can't apply for income-based repayment plans. Your wages could also be garnished and your tax refund could be offset to collect what's owed.


What happens if I'm late on private student loan payments?

Private student loans don't follow the same rules as federal loans in regard to late payments. The consequences of paying private student loans late can vary from lender to lender. But generally, you may be subject to any of the following:

  • Late payment fees
  • Negative reporting to the 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/deferment options

If you're in danger of falling behind on private student loan payments, it's important to reach out to your lender or loan servicer as soon as possible. They can discuss available options for staying current on your loans.


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

If you're having difficulty keeping up with private student loan payments, there is a potential solution: student loan refinancing. You can use Credible to compare student loan refinancing rates from multiple lenders at once without affecting your credit score.

Refinancing private student loans allows you to replace your existing loans with a new one, ideally at a lower interest rate. Lower rates can translate to lower payments and you'd be saving money on interest over the life of the loan.

Whether it makes sense to refinance 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 pro side, refinancing can reduce the total cost of borrowing to pay for school. If you've already paid off most of your school loans, however, refinancing them may not yield a significant savings benefit.

Before you move ahead with refinancing private student loans, it's important to first estimate your monthly payments and savings using an online refinancing calculator. This can give you an idea of whether refinancing makes sense from a numbers perspective.

From there, you can check your rates from different lenders to compare loan options. It's easy to do so using an online tool like Credible, where you can view a rates table that compares rates from multiple lenders at once.


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