Oh no! You’ve missed a student loan payment!
Maybe the month just flew by, or perhaps money is especially tight. Either way, the due date has come and gone. Now, it’s time to make it right.
Having a late student loan payment can mean serious consequences if you don’t act quickly.
Here’s what you need to know about how missed student loan payments work, how they can affect both your current and future payments, and what you can do to avoid being late on student loan payments again.
What happens after a late student loan payment
The timeline of how a missed student loan payment works will vary from lender to lender.
If you’re dealing with a private student loan, the terms of your loan may spell out exactly how late payments are handled. Government-backed loans may as well, but check with your loan servicer to be certain.
Either way, as soon as you have missed a payment, your student loan status changes from current to “delinquent.” You will not be changed back to “current” until you take action. This means making that payment or requesting a deferment or forbearance on your student loan.
According to a report by Credit.com, roughly 7 percent of federal student loans are currently delinquent. In fact, 70 percent of those late student loans are 90 or more days past due.
If you are among that 7 percent who have missed a payment, you must act fast; there are major consequences that happen when you do not pay on time. They include:
Late fees from a missed payment
During the first month of a missed payment, you may be charged a late fee penalty. When this occurs and how much of a hit you’ll take depends on the loan servicer.
For example, a $400 student loan payment may be charged a 5 percent late fee after 30 days, which means you could owe up to $20 extra. And late fees continue to add up as long as your account is delinquent.
Late student loan payment and your credit score
At the one month mark of missing a student loan payment, your servicer may now start to report your student loan as delinquent to the major credit bureaus.
Federal student loans report to all three after 90 days while other servicers might report to only one after 45 days. For every 30 days your payment is late, your delinquency will continue to be reported — which only makes the situation worsen as time goes by.
A late student loan payment reported on your record will reduce your credit score and may affect your ability to take out new credit (such as get a new credit card or car loan). If you have credit card debt, you may also see your interest rates rise.
In other words, that one missed student loan can now affect the rest of your debts.
After 270 days of missing a student loan payment, your loan goes from “delinquent” to “default.” Defaulting on a student loan is a huge deal.
Unlike delinquency, which still leaves you with a few options, defaulting means that your student loans are due in full and with any accrued interest or fines and penalties (such as fees charged by collection agencies).
Additionally, the government can begin garnishing your wages by up to 15 percent or even take your tax return in order to cover the costs of your missed student loan payment. And, believe it or not, your servicer could actually sue you.
Delinquency and default can be incredibly damaging for a cosigner as well. Once you are delinquent on a cosigned student loan, your cosigner’s credit will be severely impacted and collections may come after them or their property to recoup the loss.
Steps to take if you miss a student loan payment
No matter how late you are, your first step must be to reach out. Call your student loan servicer and admit to your mistake. It can be scary to make the first move, but taking responsibility for your inaction can actually help you redeem yourself.
If you have a late student loan payment because of a financial hardship (such as a medical emergency or job loss) your servicer may actually be able to help. They can assist you in applying for deferment or forbearance, which can postpone or reduce your payments based on your situation.
If neither program is right for you, or you just want to get your student loan payment back to current, your service representative can walk you through the steps (including the fees) you will need to make.
Avoiding a late student loan payment in the future
Late student loan payments happen. Whether it’s because you were unable to pay this month or you simply forgot, it’s time to set up strategies that can help you avoid all the hassle in the future.
Your best course of action is to set up automatic student loan payments. Lenders love when you sign up for automatic payments — so much that they may offer a reduction of your monthly interest rate for signing up.
And if your credit took a hit because of a late payment, having a consistent and automatic payment can help your score bounce back more quickly.
If automatic student loan payments aren’t an option, consider changing the due date of your student loan to a date that lines up with your paycheck. Many student loan providers will give you this option.
Another strategy is to simply organize your finances in a way that will help you better remember due dates. If you are not great at keeping track of paper mail, sign up for estatements or email notifications of your loan’s due dates. If you rely on your phone to keep your dates straight, set up calendar alerts (or even an alarm) that will consistently remind you that your payment is due.
The bottom line
If you’re panicked about missing a student loan, don’t freak out just yet. The sooner you realize and own up to your mistake, the faster you can get it taken care of.
However, letting a late student loan payment spiral out of control can have disastrous consequences for your money, your credit score, and your future. Make amends today by contacting your lender and setting up a payment plan that will work for you.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|