Does Missing a Student Loan Payment Affect Credit?
Understand how missed student loan payments impact your credit score and what you can do to protect your financial health.
Student loan payments significantly influence an individual’s credit standing. Timely management shapes a borrower’s financial profile, while missed payments can lead to notable consequences, affecting future borrowing opportunities and financial stability.
How Student Loan Payments Are Reported
Student loan servicers report payment activity to the three major credit bureaus: Experian, Equifax, and TransUnion. They provide monthly updates on account status, including whether payments were made on time, are past due, or if the account is in good standing.
A missed payment is reported to credit bureaus once it becomes 30 days past its due date for private loans, and 90 days past due for federal loans. While a payment is considered late the day after its due date, it takes this 30- or 90-day threshold to negatively impact a credit report. Subsequent missed payment thresholds, such as 60 or 90 days past due, trigger additional negative reporting.
Both federal and private student loans are reported to credit bureaus. Federal servicers, such as Nelnet or Mohela, and private lenders like Sallie Mae or Discover, report payment activity. The obligation to report payment status remains consistent across both loan types.
How Missed Payments Affect Your Credit Score
Payment history is the most impactful factor in calculating a credit score, often accounting for approximately 35% of a FICO Score. It assesses whether an individual has consistently met debt obligations on time. Even a single reported late payment can reduce one’s credit score.
The severity of the negative impact on a credit score increases with the duration of the delinquency. A payment reported as 30 days late causes less damage than one reported as 60 or 90 days late. Each subsequent missed payment at longer intervals can further depress the score. Multiple missed payments over time have a more severe effect.
The initial drop in a credit score due to a missed payment varies based on an individual’s overall credit profile. For example, a person with an excellent credit score might experience a more significant drop, potentially over 170 points for a 90-day delinquency, than someone with an already lower score, who might see a drop of around 87 points. Derogatory marks, such as late payments, remain on a credit report for up to seven years from the date of delinquency.
Managing Your Student Loan Payments
Individuals facing difficulty making an upcoming student loan payment should contact their loan servicer before the due date. Federal student loan borrowers can explore options such as deferment or forbearance, which temporarily postpone payments. Income-driven repayment plans are another federal option that adjusts monthly payments based on income and family size, potentially resulting in payments as low as $0.
For those who have already missed a payment, immediate communication with the loan servicer is important. Some servicers may adjust reporting if the missed payment is resolved promptly and is an isolated incident. This is at the servicer’s discretion and often depends on the borrower’s payment history.
Establishing proactive measures can help prevent future payment issues and protect credit standing. Setting up automatic payments ensures timely remittance each month. Many federal and private loans offer an interest rate reduction, often 0.25%, for enrolling in autopay. Creating and adhering to a personal budget allows borrowers to allocate sufficient funds for loan obligations. Understanding loan terms, including interest rates and repayment schedules, empowers informed financial decisions.