Your credit score might increase and your credit history can be improved if you pay off your student loans on time.
On the other hand, your credit record may also show that you made a student loan payment late or skipped it.
Delinquent payments can lower your credit score and have negative financial effects, such as making it harder for you to get a new credit card, auto loan, or mortgage.
If you’re curious about how to get student loans off of a credit report, the answer is that you can only do so if the report contains false information.
However, after they have been paid off or for seven years after going into default, student loans are eventually taken off a credit report.
The following information explains how student loans appear on credit reports, what happens if you fail on a loan, and how to correct false student loan information.
What Is a Credit Report?
It’s beneficial to study what a credit report is before thinking about how student loans will affect your credit record.
It is a statement that contains information on your recent and previous credit activity, including information about the status of your credit card accounts and your history of loan payments.
Credit reporting companies, who gather financial information about you from a variety of sources, including lenders or credit card companies, create these statements.
Credit reports are used by lenders to determine whether to grant you a loan and at what interest rate.
When you sign up for internet service, purchase insurance, or rent an apartment, for example, other businesses may also use credit reports to make decisions about you.
Missing payments on Student Loans
Examining what transpires when a student loan is in default is equally important.
The Education Data Initiative estimates that 7.8% of all student loan debt in the US is in default and that one in ten Americans have defaulted on a loan.
Depending on what kind of student loan you have, there are different points at which it is deemed to be in default.
If you miss at least 270 days of payments on a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, you’re deemed to be in default (about nine months).
If you don’t make any planned payments by the due date for a loan made via the Federal Perkins Loan Program, the loan’s holder may declare the loan to be in default.
Student loan default can have serious repercussions, including:
- Your outstanding student loan balance, interest included, can become instantly due.
- If your employer fails to withhold a percentage of your income and deliver it to your loan holder, the government may garnish your wages by up to 15%.
- A portion of your tax refund and government benefit payments might be withheld and used to pay off your delinquent loan.
- You run the risk of losing your eligibility for all future federal student aid.
The effects of nonpayment can be felt without going into default on your student loans.
Your loan may be deemed in default, and you may incur additional fees even if your payment is only a day late.
How long are Student Loan Records kept on a Credit Report?
The credit bureaus will keep a record of your loan delinquent for seven years if it is reported to them.
For undergraduate and graduate students with extreme financial need, a Federal Perkins Loan, a low-interest federal student loan, is the exception to this rule.
Until you fully repaid this loan, it would still be listed on your credit record.
There are steps you may take if you’re having trouble keeping up with your federal or private student loan payments before default-related penalties start to apply.
Applying for a student loan forbearance, which temporarily lowers your payments, or a student loan deferral, which allows you to temporarily stop making payments on your federal student loans, are two options you have.
For more information about modifying your repayment schedule, get in touch with your loan servicer.
It may also be possible to refinance your student loans, which could result in a cheaper monthly payment if you prolong the term.
Although these choices offer temporary respite, it should be noted that they usually come with higher loan repayment costs in the long run.
What Is the Process for Contesting a Student Loan on My Credit Report?
Regularly checking your credit report is a wise practice.
All three of the major credit reporting companies—Equifax, Experian, and TransUnion—offer free reports upon request, and they are all obligated by law to do so once every 12 months.
There are three possible causes for your student loan to have been mistakenly declared in default and reported to the credit bureaus.
The first step in fixing these mistakes is as follows:
1. If You Are Still a Student
If you are enrolled in school and think your loan was mistakenly declared in default, get in touch with the registrar of your school and request a record of your attendance.
Then, give your loan servicer a call to learn more about your history of attending school.
Give your loan servicer access to your records and ask that your student loans be appropriately reported to the credit bureaus if they have inaccurate information on file.
2. If Your Request for Deferment or Forbearance Was Accepted
There’s a risk your loan servicer’s files aren’t up to date if you think your loan was accidentally placed in default despite the fact that you were authorized for (and were supposed to be in) a deferment or forbearance.
Ask the loan servicer to check the beginning and end dates of any deferments or forbearances that have been applied to your account.
Request that your student loans be appropriately reported to the credit bureaus and supply evidence with the correct dates if the loan servicer doesn’t have them.
According to the Fair Credit Reporting Act, a borrower may contest the veracity and accuracy of the data submitted to the credit bureau and included in their credit report.
3. Inaccurate Payment Reporting
You can ask your loan servicer for a statement that lists every payment made on your student loan account so you can compare it to your bank records if your loan has been flagged as late or in default by the credit bureaus but you think your payments are current.
You can produce proof of payment and ask that your account be appropriately reported to the credit reporting agencies if part of your payments is missing from the statement given by your loan servicer.
Hence, it is recommended practice to additionally provide a written copy of your dispute to the credit agencies if you believe there is any kind of inaccuracy pertaining to your student loan on your credit report in any of the three scenarios above so they are aware that you have reported a mistake.
Why Student Loans Should Remain on Your Credit Report
While you cannot technically get your student loans removed from your credit record, you can challenge any inaccurate information about your loans if it appears on your report.
On the plus side, your credit record will reflect favorably if you pay your student loans on schedule each month.
It demonstrates to lenders your responsibility and your propensity for timely loan repayment.
How to Pay Your Student Loans When You’re Having Issues
If you’re having difficulties making your student loan payments on time, you may be able to refinance with a longer loan term or enroll in a federal income-based repayment plan to lower your monthly payments.
Your student loans can start to appear more favorably on your credit report once you start paying them off by the due date each month.
Again, even though these solutions offer temporary respite, they typically entail paying more over the course of the loan.
How to Remove Student Loans From Credit Reports
As was previously stated, student loans can only be taken off of a credit record if the information is false.
You can contact the loan servicer to have inaccurate information removed from your credit report.
It’s also a good idea to send copies to all three major credit bureaus if there are any discrepancies.
After seven years, the information about a defaulted student loan is deleted from a credit record.
Your loan may continue to show up on your credit record for up to 10 years as proof of your good payment history and can raise your credit score if you make on-time payments and pay off the loan in full.
You might want to check this: Guides to Dave Ramsey’s Student Loan Refinancing Plan
While student loan information is typically not able to be removed from a credit report unless there are mistakes, it isn’t necessarily a bad thing if you pay your bills on time.
After seven years, a late loan will no longer appear on your credit report, but you are still obligated to repay it.
There are ways to make loan repayment simpler if you’re having problems keeping up with installments.
Federal student loan borrowers may choose loan forgiveness, an income-driven repayment strategy, or a modification of the loan’s conditions.
Additionally, if you meet the requirements, you can combine several student loan amounts into a single new loan with a private lender like SoFi, preferably at a reduced interest rate.
Remember, too, that if you refinance federal loans with a private lender, you will no longer be eligible for government perks including forbearance, deferment, and income-based repayment plans.