Missed a Student Loan Payment? How that Will Impact Your Credit Report (and What to Do Next)

Millions of Americans have student loan debts outstanding that come to tens of thousands of dollars or more, whether they're still in college or more than a decade past their graduation dates. But it's important for them to note that there are numerous repayment rules related to federal education financing that may differ from those for other types of credit.

Federal student loans have a number of very different rules that can help to ease repayment issues should they arise, including ways to defer the date upon which they come due after graduation, and how delinquency is reported on them. However, borrowers should know that these loans also differ considerably from those issued by private student lenders and knowing the difference can often be very important in the event of any potential borrowing missteps.

What happens when you miss a federal student loan payment?
Those who have sizable federal student loan debts — and the average college student usually graduates with tens of thousands of dollars' worth — may have some difficulty in affording to pay them back within six months of graduation, which is typically when they come due. Fortunately, it may be possible to obtain a deferment or forbearance that allows borrowers to put off these payments until they can better afford them, which in turn may serve to help preserve the good credit score a young borrower might have built. However, it's also important to note that these do not last forever, and as such must be approached with the idea that repayments must come at some point.

Once borrowers get to the point at which they have to begin repayments, these often-sizable monthly transactions can take a toll on their finances rather quickly, particularly if they have had difficulties in obtaining full-time employment, as many current college graduates might. As a consequence, some might miss a month here and there when dealing with their student loans. It is important to note, though, that a large number of the lenders that issue federal student loans won't actually report an account as being past due until it is at least 60 days late at the end of a billing period. That means that borrowers who miss a payment by a day, a week, or sometimes even a month won't see their credit scores impacted at all, but borrowers should also keep in mind that all of these lenders are different and therefore have varying reporting rules; knowing the period at which point delinquent debts will be reported can be a major boon to those who have to deal with financial difficulties every once in a while.

It is further notable that while delinquency on these accounts will hurt borrowers' credit ratings, the damage done can be limited in two ways. First, because these are considered installment loans, a late payment that's reported to one of the credit bureaus will not do as much damage as one for revolving debt like credit card bills. Second, and perhaps more important to the borrowers who must occasionally miss payments as a result of the financial difficulties they're dealing with, many federal student loan issuers also help to smooth over delinquency issues from a borrower's credit rating almost immediately after they are dealt with. That means that while a late payment will still show up on the person's credit report, the damage done to their score will be repaired.

How do private student loans differ?
In general, private student loans have less favorable terms than those issued by the federal government. Many come with considerably higher rates and fewer repayment options, and when it comes to delinquent balances, these lines of credit function in much the same way as other debts. Consequently, even one missed payment, whether it's by a week or even a day, will cause massive harm to borrowers' credit standings and do not come with the looser rules for getting those missteps sorted out. As a result, those who have private student loans will necessarily have to be far more careful about how they handle them than they would have if they'd received the funds from the federal government.

Of course, as with any other type of credit, there may be some instances in which issues arise as a result of the way these debts, private or federal, are reported. For this reason, it may be wise for borrowers to routinely check their credit reports and make sure there are no unfair markings taking a negative toll on their standings. If there are, it might be wise to work with a credit repair law firm, which may be able to help to return their scores to where they deserve to be more expediently than consumers might have been able to achieve on their own.