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 fix that late student loan payment and make things right.
Missing a payment can mean serious consequences if you don’t act quickly. Here’s what you need to know.
What happens after a late student loan payment?
The timeline of how a late student loan payment is handled will vary from lender to lender. If you’re dealing with a private student loan, your loan contract should spell out how this is done. Likewise, the Department of Education explains on its Federal Student Aid website how late payments get processed.
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.
In fact, recent data showed roughly 11.5% of federal student loans were 90 days or more past due. If you, too, have a late student loan payment, you must act fast because there are major consequences.
Late fees from a missed student loan 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% 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 payments and your credit score
A late student loan payment could result in your servicer reporting the delinquency to the three major credit bureaus. Servicers for federal student loans do so after 90 days, while the policy for lenders and servicers of private student loans varies.
A late student loan payment on your record will reduce your credit score and may affect your ability to take out new credit (such as getting 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 could now affect the rest of your debts.
After 270 days of having a late student loan payment, your federal student loan goes from “delinquent to “default” — and this can happen even sooner with private student loans.
Defaulting on a student loan is a huge deal. Unlike delinquency, defaulting means that your student loans are due in full, along with any accrued interest or fines and penalties (such as fees charged by collection agencies).
Additionally, the government can begin garnishing your wages or even take your tax return in order to cover the costs of your missed federal student loan payment. And, believe it or not, your student loan servicer (federal or private) or a collections agency could sue you.
If you had someone help you get the loan, delinquency and default can be incredibly damaging for that 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 on your student loan payment, there are steps to take to help fix the situation:
- Reach out to your lender or servicer and admit your mistake.
- Let them know about any financial hardships. If you have a late student loan payment because of a medical emergency, job loss or other unforeseen event, your servicer or lender may be able to help.
- Consider applying for deferment or forbearance, which can postpone or reduce your payments based on your situation.
- If you have federal student loans, then income-driven repayment plans are an option — they could push your monthly payment as low as zero dollars!
- Consider a student loan late payment forgiveness program.
If you just want to get your student loan payment back to current, your service representative can walk you through the steps you will need to make, including any fees that must be paid. Consider it a sort of “student loan late payment forgiveness program.”
Avoiding a late student loan payment in the future
Late student loan payments happen. Whether 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 so that they may offer a reduction of your monthly interest rate for signing up, usually a quarter of a percentage point.
And if your credit took a hit because of a late student loan payment, having a consistent, 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 e-statements or email notifications of your loans’ 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.
Late student loan payments: 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.
Letting a late student loan payment spiral out of control can have disastrous consequences for your money, your credit score and your future. Take responsibility today by contacting your lender and figuring out a payment plan that will work for you.
Sage Evans contributed to this report.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 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 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% 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 July 31, 2020, 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 7/31/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.