How Student Loan Debt Affects Your Credit
In the U.S., there are more than 44 million people and counting with student loan debt, many struggling to pay it off while trying to make ends meet. Student loans can have terms of 10 years or some even as long as 20 as well as high interest rates that mean your student loans will cost you a lot more than you may have anticipated back when you were an eager college student. Federal student rates currently range from 4.53-7.08% depending on the type of loan. If you had a $30,000 student loan at an interest rate of 6% and paid it off in 10 years, you would have a monthly payment of $318.20 and would pay $8,183.59 in interest alone.
That $318.20 monthly payment begins at a time when you’re starting your first job in your field, getting an apartment, car, and doing the other things that college grads do as they begin their adult lives and continue well into adulthood. Student loan debt can hold you back and if it becomes a struggle to pay each month, it could mean more credit card debt as you just try to keep your head above water.
Impact On Your Credit
Student loans are good for your credit. They help you build a good credit history of on-time payments at a time when you may have few sources of credit. A good credit history allows you to get loans at lower interest rates which can save a lot of money. It also helps diversify your credit so you have more than just credit cards or an auto loan. You’ll get a higher credit score if you have various types of credit.
Student loans can also harm your credit when you begin to struggle to pay them. A single late payment can begin to lower your score and when they begin to slide more, 60 days late, 90 days late, your score really begins to drop. Once the loan is 270 days late, you have defaulted which will greatly impact your score negatively and it will remain on your credit report for 7 years.
What Can Be Done
Everyone knows that something needs to be done about the mounting student loan debt in this country. As politicians offer their various plans that may or may not come to fruition sometime in the distant future, people with student loan debt need help now. That’s where student loan modification comes in.
Student loan modification is a way to modify your current loans or in some circumstances, to eliminate them altogether and there are three types:
Depending on your situation, loans may be forgiven and considered paid. It doesn’t damage credit like a discharge of loans would. There are a few fields in which loan forgiveness may be allowed if specific criteria are met. They include teachers, healthcare workers (doctors, nurses, dentists, mental health professionals), government employees for local, state, and federal government, public service sector, as well as AmeriCorps and Peace Corps volunteers.
It’s common for people to graduate college with many different loans from different loan servicers with different interest rates. Consolidating loans into one loan gives one convenient monthly payment and usually, the interest rate is lower which can save thousands in interest over the life of the loan. A consolidation loan will also bring your loan current which will help raise your credit score if it’s fallen due to falling behind on payments.
Loan Rehabilitation is for borrowers who have fallen behind and are having difficulty keeping up. To rehabilitate, or repair a loan, the borrower agrees to pay a specified amount based on income. After making on-time payments for 9 months, the loan will be considered paid and the derogatory default information will be removed from the borrower’s credit report.
Miller, Hollander & Jeda now offers loan modification to clients who may be struggling with student loan debt. It can be done as a way of avoiding bankruptcy or can be done in conjunction with a bankruptcy and depending on which modification you qualify for, you could save thousands over the life of your student loans. We’ve made the process simple and easy to understand and all it takes is a consultation to see if you qualify. Once we know that you do, we make it all happen. If you have student loan debt that feels out of control, call Miller, Hollander & Jeda at (239)775-2000 today and find out how we can help reduce, eliminate, better manage that debt.