In September, Equifax announced that it had been hacked. The company, one of the three major credit reporting bureaus, said that hackers could have the personal information of nearly 145.5 million Americans. That means criminals could have access to sensitive data, including credit card information and Social Security numbers.
Immediately after Equifax went public with this information, consumer watchdog groups and financial experts encouraged consumers to put a credit freeze on their accounts to protect their credit. However, putting a freeze on your account after the Equifax data breach can have unintended consequences, especially if you’re applying for student loans.
The Equifax data breach
From May through July 2017, cyber-criminals hacked into Equifax’s system, accessing the names, Social Security numbers, birthdates, and driver’s licenses of millions of people. They were also able to extract the credit card numbers belonging to over 200,000 people.
Despite the fact that executives knew about the Equifax data breach as early as July, they didn’t go public with the information until September. That delay could have worsened the situation for some individuals.
Protecting your information
Equifax is offering a year’s membership to TrustedID Premier, an identity protection service, free of charge to those affected by the data breach. The Federal Trade Commision (FTC) and other organizations, however, say signing up for identity protection isn’t enough.
With your name, birthdate, and Social Security number, thieves can use your information to open new credit cards or take out loans in your name. Their actions can destroy your credit report and credit score, and recovering from identity theft can take months or even years.
To prevent that from happening, the FTC recommends placing a credit freeze on your report at all three credit bureaus. With a credit freeze, the credit bureaus lock your account so lenders cannot access your information. As long as a credit freeze is in place, you cannot open new credit cards or take out a loan — and neither can identify thieves.
How an Equifax credit freeze affects student loans
While a credit freeze offers some protection, it can have unexpected consequences when it comes to applying for student loans.
Although most federal student loans are not dependent on a borrower’s credit history, some student loans do require a credit check. But with a credit freeze in place, lenders will be unable to verify your credit and will not approve you for a loan.
A credit freeze could impact your eligibility for the following types of student loans:
- Grad PLUS loans: Grad PLUS loans are federal loans for graduate and professional students enrolled in school. Students cannot have an adverse credit history and must go through credit counseling to qualify for a loan.
- Parent PLUS loans: Parent PLUS loans are federal loans parents can use to pay for their child’s undergraduate education. Like Grad PLUS loans, parents cannot have an adverse credit history or they might need an endorser to sign the loan with them. For Parent PLUS loans, only the parent’s credit information is considered, not the student’s.
- Private student loans: Private lenders — such as banks or individual companies — provide loans to students. Typically, students use private student loans to pay for college when they have exhausted other options. The lender checks the applicant’s credit history before approving the loan.
If you placed a credit freeze on your account after the Equifax data breach, lenders will not be able to access your credit report. Even if you have a fantastic credit history, lenders won’t approve your application and you could be left scrambling to find other forms of financial aid.
What to do if you’re applying for student loans
The Equifax data breach is scary, and taking action is a smart idea. However, if you need to submit your FAFSA and apply for a loan, you should wait until your loan is approved to put a credit freeze in place.
If you’re in need of financial aid and have already placed a credit freeze on your account, you won’t be able to receive some student loans while the freeze is in place. Instead, you’ll have to contact the credit bureaus and ask them to remove the freeze.
It’s a good idea to remove the freeze before you plan on applying for a loan. You should keep your account open until you receive a notification from the lender that says they’ve approved you for your loan.
You can remove a credit freeze by following the instructions provided by each credit reporting agency. If you choose to contact the agency through the mail, be sure to include your full name, address, Social Security number, PIN number, a copy of your driver’s license, and a copy of an utility bill or bank statement along with your request.
- Submit your request online; or
- Mail your request to: Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348
- Submit your request online;
- Mail your request to: Experian Security Freeze, P.O. Box 9554, Allen, TX 75013
- Submit your request online. Depending on your state, you might have to pay a fee to remove the credit freeze. You can check your state’s requirements here.
Once you receive a loan approval from your lender, you can contact the three credit bureaus to reinstate the credit freeze.
The Equifax data breach scared a lot of people, and many took immediate action without thinking about the potential consequences. If you need to apply for PLUS loans or private loans, take action now to ensure lenders can access your credit report.
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