What Happens When You Miss a Student Loan Payment?

Missing a student loan payment means failing to submit the scheduled amount by its due date. Even a single day past due can initiate a series of consequences for the borrower. Understanding these stages and their potential impacts is important for managing financial obligations.

Immediate Consequences of a Missed Payment

A student loan becomes delinquent the moment a payment is not made by its due date. Initial repercussions unfold within 30 days. Loan servicers may impose late fees after this period, increasing the amount owed.

A payment reported as 30 days late can negatively affect a borrower’s credit score. While federal loan servicers typically report delinquency to major credit bureaus after 90 days, private lenders may report a missed payment as early as 30 days past due. This initial reporting can lower a credit score, making it difficult to obtain favorable terms on future loans or credit cards.

Communications from the loan servicer, such as emails, calls, or letters, will inform the borrower and encourage prompt resolution.

Short-Term Effects of Continued Missed Payments

As missed payments accumulate beyond 30 days, the loan progresses through various stages of delinquency. Continued delinquency leads to more significant damage to a borrower’s credit score. For federal loans, delinquency is reported to national credit bureaus once the loan is 90 days past due, lowering the credit rating. This negative mark can remain on a credit report for up to seven years, affecting financial opportunities.

Communication and collection efforts become more persistent as delinquency lengthens. Loan servicers will intensify outreach through more frequent phone calls and formal letters, warning of further consequences.

For some private student loans, continued severe delinquency can lead to loan acceleration. The lender may demand the entire outstanding balance immediately. While less common for federal loans, this clause creates an immediate financial obligation.

Long-Term Impacts of Default

A student loan enters default when payments have been missed for an extended period, leading to severe consequences. For federal student loans, default typically occurs after 270 days of non-payment. Private student loans may enter default much sooner, sometimes as early as 90 or 120 days past due, depending on loan terms.

Defaulting on federal student loans triggers significant penalties. The U.S. Treasury Department can implement wage garnishment, withholding a portion of a borrower’s earnings. Federal tax refunds can also be seized through Treasury offset. In some cases, a portion of Social Security benefits may also be withheld.

Default also results in the loss of eligibility for future federal student aid, including grants, loans, and work-study programs. Borrowers in default lose access to beneficial repayment options such as deferment, forbearance, and income-driven repayment plans. Additionally, collection costs are added to the outstanding loan balance.

For private student loans, the consequences of default often differ from federal loans. Private lenders are more likely to pursue legal action, potentially filing a lawsuit to obtain a court judgment. A judgment can grant the lender the ability to garnish wages or seize assets, such as funds in bank accounts. The severe negative impact on credit remains a significant consequence, affecting a borrower’s ability to secure housing, employment, and other financial products for many years.

Options for Addressing Missed Payments

Addressing missed student loan payments proactively can mitigate severe consequences. The initial step is to contact the loan servicer immediately. Establishing communication can open pathways to solutions before the situation escalates further.

Several options exist for borrowers experiencing difficulty making payments before their loan enters default. Deferment offers a temporary suspension of payments, often granted for unemployment, in-school enrollment, or economic hardship. Forbearance also allows for a temporary pause or reduction in payments, often granted for reasons like illness or financial difficulty.

Income-Driven Repayment (IDR) plans can make federal loan payments more manageable by adjusting the monthly amount based on the borrower’s income and family size, potentially lowering payments to as little as $0 per month.

Federal loan consolidation, when pursued before default, can simplify repayment by combining multiple federal loans into a single new Direct Consolidation Loan with one monthly payment. This process can extend the repayment period, potentially lowering the monthly payment.

Even after a federal student loan enters default, specific remedies are available. Loan rehabilitation allows a borrower to bring a defaulted federal loan back into good standing by making nine on-time monthly payments over 10 consecutive months. This removes the default status from the borrower’s credit history and restores eligibility for federal student aid benefits. Another way to get out of federal default is through consolidation, which involves consolidating the defaulted federal loan into a new Direct Consolidation Loan. For private student loans, options after default are less formal but may include negotiating a payment plan or a settlement with the lender.