Federal student loan payments resume in just a few short weeks unless Congress takes further action. If you’re worried about the coronavirus administrative forbearance ending, you might be wondering what would happen if you fell behind on your payments.
Below, we’ll cover what happens when you miss a student loan payment and tips on how to stay current on your payments.
What Happens When You Miss a Student Loan Payment
Federal student loans follow a standardized process for late or missed payments that’s the same for every borrower. Private student lenders use their own process, and it varies depending on who your lender is.
Federal Student Loan Late Payment Policy
The federal government’s student loan late payment policy follows a strict timeline:
After 30 Days: Your loan servicer can charge you a late fee of up to 6% of your missed payment amount.
After 90 Days: Your loan servicer can now report your late payments to the credit bureaus. A late payment stays on your credit report for seven years and can lower your score by as much as 100 points. This makes everything from getting a new credit card to renting a new apartment more challenging.
After 270 Days: Your federal student loans move from delinquent status to default. Your loan servicer can now put your loan in collections, garnish your wages, and even seize your tax refund.
Private Student Loan Late Payment Policies
Visit your private student loan lender’s website to find information about their late payment policies. Some private lenders waive a late fee for a first missed payment. Others always charge a late fee that’s either a fixed percentage of your payment or a flat fee.
After 30 Days: Private lenders might report your late payment to the credit bureau. Again, this will negatively affect your credit score.
After 120 Days: Around this time, your private student loans can enter default. Private lenders can sue you to get permission from the judge to garnish your wages.
What to Do If You Miss a Student Loan Payment
Missing a student loan payment isn’t the end of the world. Stay calm and act quickly to remedy the situation and save your credit score.
Make the Payment and Then Contact Your Lender
If you’re able to make the payment, make it as soon as you realize your mistake. This is the easiest way to get your account up to date. Even if you take this step, you’ll still want to reach out to your lender. Let them know the payment is on its way. Often, the lender will add a note to your account that the payment is pending, and that’s that.
Reach Out to Your Lender if You Can’t Afford the Payment
If you can’t afford the missed payment, reaching out to your lender or federal loan servicer is especially important. Explain what happened and find out what your options are. You might be able to switch into deferment or forbearance due to economic hardship.
Federal student loan borrowers can apply for forbearance if they’re unemployed, unable to pay due to medical bills, facing other financial hardships, or if the payment exceeds 20% of their gross monthly income.
Private student lenders set their own criteria for forbearance—if they even offer it at all. When you call your lender, they’ll inform you of any available programs.
How to Prevent Yourself From Missing a Student Loan Payment
Missing a payment happens for many reasons. Maybe you simply forgot to make the payment. Or maybe, you missed it because you couldn’t afford to pay. Whatever your reason, the following measures can help ensure you don’t miss a payment.
Did you forget to make the payment? Enroll in autopay. That way, your payments will automatically come out of your connected bank account. Just make sure the bank account you connect has a steady stream of income to avoid overdraft fees from your bank.
Update Your Contact Information
Did you miss your payment because you didn’t get notified about the bill? Make sure the contact information you have on file with your lender(s) is up to date.
Anyone with federal student loans currently in administrative coronavirus forbearance should take this step. Your loan servicer will use the contact information on file to contact you before payments resume to let you know when your first bill is due and how much it will be.
Enroll in an Income-Based Repayment Plan
An income-based repayment (IBR) plan bases how much you owe each month on your income. You can enroll your federal student loans in an income-based repayment plan by contacting your federal student loan servicer or visiting StudentAid.gov.
Enrolling in an IBR plan will make your monthly payments more affordable. That way, you’ll be less likely to miss a payment.
Private student loans aren’t eligible for federal income-driven repayment plans, but your lender might provide other relief measures like temporary interest-only payments or forbearance. Reach out to see what your options are.
Recertify Your Income
Borrowers already enrolled in an IBR can recertify their income. Make this move if you’ve experienced a recent decrease in income. Recertifying will give you an updated monthly payment based on the plan you chose and your actual income—not what you might have been making before.
Ask to Change Your Payment Date
Do you struggle with spending money as soon as you have it? You might benefit from switching your payment date to a day that lines up with your payday. That way, the money is in the bank when your payment is due, but it’s not in there too long that you’re tempted to spend it on something else.
Not all lenders will let you switch your payment date, but there’s no harm in asking.
Refinance to a Lower Monthly Payment
Missing a private student loan payment has tougher consequences. If you can’t swing your monthly private student loan payments, refinance your private student loans. Refinancing to a lower interest rate or a longer loan term will lower how much you’ll owe each month. Just know that you could end up paying more over the life of your loan.
The private student loan refinance companies we partner with all offer great borrower benefits like cosigner release, economic hardship forbearance, flexible repayment terms, and an autopay discount. Get a quote in minutes to see how refinancing could lower your monthly bill.
Missing a student loan payment is stressful, but it happens. There’s no reason one or two missed payments need to ruin your finances moving forward. If you miss a payment, just reach out to your lender or loan servicer to explain the situation. They can walk you through your options and help you figure out a plan.
Other articles you might find helpful include:
- Will the Government Extend The Grace Period Because of Coronavirus?
- Tips on Paying Student Loans During Coronavirus for All Borrowers
- Can I Refinance My Student Loans After a Consolidation?
- Can I Transfer Private Student Loans To Federal Loans?
- Student Loan Default: The Dangers & How To Get Out
- Debt Snowball Method: How it Works