- A student loan delinquency occurs as soon as you miss a payment on your student loan.
- Delinquency on federal student loans are reported to credit bureaus after 90 days of non-payment.
- Delinquency on private student loans are reported to credit bureaus after 30 days on non-payment.
Being delinquent refers to a situation in which a borrower is past due on a debt. A student loan delinquency occurs when you are past due on your student loans. If you have missed a payment or you’re close to missing one, it’s important to understand the consequences of student loan delinquency and what you can do prevent getting into this situation.
Understanding Student Loan Delinquency
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When you take a student loan, whether it’s a federal or private student loan, the lender draws up an agreement clearly stating the repayment terms. The repayment terms include information such as when the payments start, the fixed monthly due date, and the monthly payment amounts. Once you sign this agreement, you are legally obligated to make those monthly loan payments on or before the due date.
If you fail to make a payment on your student loan by the agreed-upon due date, your loan goes into delinquency. If you’ve missed a payment, the delinquency will be removed after you’ve made the missed payment and paid any late fees and interest.
Being delinquent on your student loan debt could affect multiple aspects of your financial future. What happens after your student loan account goes into delinquency depends on whether you missed a payment on a federal student loan or a private student loan. Federal and private lenders assess delinquency slightly differently.
Consequences Of Student Loan Delinquency: Federal Student Loans
With federal student loans, borrowers have up to 90 days after the due date to make good on their missed payment before it’s reported to the credit bureaus.
Here’s an approximate timeline of what happens when you miss a payment on your federal student loans:
1 day: Your student loan status changes from ‘current’ to ‘delinquent’ 1 day after the missed payment. It does not revert to ‘current’ until you make that payment or request a deferment or forbearance.
15 days: After about 15 days past the due date, your loan servicer will send you a reminder to make the payment immediately.
30 days: Depending on the type of federal student loan and your loan servicer, you may start incurring late payment fees on the unpaid amount. Some loan servicers may charge the late payment fees as soon as you miss the payment.
90 days: If you do not make that payment within 90 days after the due date, your federal loan servicer will report it to the national credit bureaus. Your delinquency will then show up on your credit report, which has other consequences as explained below.
Note: On September 30, 2023, the Biden administration announced that non-payments or late payments on federal student loans would not be reported to credit bureaus for 12 months, that’s until September 30, 2024. During that time, late, partial, or missed payments would also not be considered to be default or referred to collection agencies.
270 days: If you have not made payment after 270 days of the due date, your federal loan status changes from ‘delinquent’ to ‘default’. Defaulting on a student loan has additional consequences. When your loan goes into default, the full amount becomes due immediately along with all accrued interest or penalties and fines. The government can start garnishing your wages or take your tax returns to recover the money they’ve loaned you until you are paid up.
Consequences Of Student Loan Delinquency: Private Student Loans
With private student loans, the delinquency guidelines vary by lender. While the process is more or less similar to that of federal student loans, there is a significant difference in the timeline and the fees.
Here’s an approximate timeline of what happens when you miss a payment on your private student loans:
1 day: Your loan status will change to delinquent within one day after a missed payment.
15 days: Most private lenders charge a late fee after 15 days of the missed due date. This fee may be a percentage of the missed payment, or it may be a standard fee.
30 days: Generally, private lenders report a delinquent account to the credit bureaus if you do not make the payment within about 30 days after the due date. Remember this could vary among lenders. Generally, though, it’s a shorter timeframe than federal student loans, which are reported after 90 days of a missed payment. Once the delinquency is reported, it will show up on your credit report.
120 days: Private lenders define default differently with most changing your status from ‘delinquency’ to ‘default’ after 120 days of non-payment. Once your loan is in default, the full amount becomes due immediately along with all accrued interest or penalties and fines. If you fail to make this full payment, the lender can begin garnishing your wages immediately after 120 days.
Because missed payment terms and penalties vary among lenders, it is important to read your loan agreement thoroughly to understand the delinquency and default consequences.
What Happens When Delinquency Is Reported to Credit Bureaus
Once a delinquency is reported to the credit bureaus, it is recorded on your credit report. This could damage your credit score. On-time payments add points to your total score, while missed payments cause your score to drop.
A low credit score could:
- make it harder for you to get approved for mortgages, vehicle loans or personal loans.
- cause you to incur higher interest rates.
- impact your employability as well as your ability to rent an apartment.
It can take time to repair bad or poor credit. So, it’s important to keep on top of payments and talk to your bank right away if you are having trouble those payments to find out what options you may have.
Difference Between Student Loan Delinquency and Student Loan Default
Federal student loans go into delinquency one day after non-payment. They then go from delinquency to default after 270 days from the missed payment due date.
Private student loans go into delinquency one day after non-payment. They then go from delinquency to default after about 120 days from the missed payment due date (this could vary among lenders).
The major difference between defaulting on federal and private students is the timeline. Other than that, the consequences are similar.
- Once your loans go into default, the entire loan balance has to be repaid in full immediately along with late fees.
- When your loans are still in delinquency, you may be able to apply for deferment and forbearance to avoid default. However, once your loans are in default, you won’t be able to change your repayment plan or apply for deferment or forbearance.
- When a default it recorded on your credit report, it stays there for 7 years.
What To Do If Your Student Loan Is Delinquent
These two tips will help you tackle your student loan delinquency and keep you from falling further into debt.
- Call Your Lender. As soon as you miss a payment, call your federal loan servicer or private lender immediately and ask for help. If you can call your lender help even before you miss that payment, that’s even better. Explain your situation to them and tell them why you may be late in paying that amount. Lending agencies have been through this before and are in the best position to offer you solutions that will help you get out of or avoid student delinquency.
- Request a Forbearance. If you’ve fallen behind by several payments, requesting loan forbearance may be a good option. Forbearance allows you some time to get extra money together to begin paying down your debt. Call your lender first and explain the situation. They may be able to offer alternate options. It’s in the lenders’ best interest to help borrowers tide over their temporary financial obstacles.
Did You Miss the Due Date Because You Forgot?
Many borrowers actually enter delinquency simply because they lost track of due dates. If that is you, there are a couple of things you can do.
- Set up auto-pay. That way the amount debits from your bank account and transfers to the lender’s account on a set date every month.
- If auto-pay is not an option for whatever reason, set up recurring reminders on your digital or paper calendar.
- Consolidate your federal student loans. This combines multiple loans into one. That means keeping track of one payment amount and one due date.
Once you get back on track financially, try to keep it that way. Defaulting on student loans is one of the fastest ways to ruin your credit, which will make it even more difficult for you to get loans in the future.
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