How to Handle a Late Student Loan Payment

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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