Impact of Missing Payments

Failing to make payments on your private student debt can have serious negative impacts on your overall financial picture. 

The first day after a missed loan payment, your loan becomes delinquent, and it stays that way until your payments are up to date. Each missed payment might also result in a late fee. 

Delinquent private loans, your lender may report it to the credit bureaus as early as 30 days past due.

Having late payments on your credit report can negatively impact your credit score and make it more difficult to open credit cards, borrow money or even get an apartment. 

In the event that you can get a loan, you’re likely to pay higher interest rates.

The longer your loans are past due, the worse the ramifications become. Private student loans enter default after 120 days.

Once you enter default, you may face a myriad of consequences such as going to collections. 

Your credit will take a much larger hit than it would for just a late payment. 


Consequences of Defaulting on Your Student Loans

Here are some examples of what could happen if you don’t pay your student loans.

1. Late fees

If you’re 30 days late on federal student loans, you’ll typically encounter a late fee of up to 6% of the amount that was due and unpaid. So if you owed a late payment of $350, you might have to pay up to $21 extra on top of your existing student loan payment.

Private student loans have similar late fees but aren’t standardized. In this scenario, you’ll either pay a predetermined percentage or a flat fee, whichever is higher. 


2. Lower credit score

After a certain number of days, a lender can report the issue to credit bureaus, which can adversely affect your credit score. 

This can impact your life in several ways, including making it more difficult to qualify for credit cards, buy a car and get a mortgage. 

If you’re approved with bad credit, you’re likely to experience higher interest rates. 

Loan services will report your late payments to credit bureaus when you’re 30 days past due for private student loans and 90 days past due for federal student loans.


3. Lose loan benefits

You’re no longer eligible for deferments or forbearances once you default on your federal student loans. 

You’ll also no longer be able to choose your repayment plan and may have to shift to an income-driven repayment plan instead. 

In turn, this limits your repayment flexibility moving forward. 


 4. Negatively impact credit

We already mentioned that late payments can hurt your credit score. But going into default only worsens the issue and can send your credit score plummeting even further. 

Even if you had good credit beforehand, it can bring you down into the “poor” range.


5. Co-borrower becomes involved

A co-borrower is equally responsible for the repayment of a student loan. 

If you default, the lender will turn to your cosigner, and they’ll have to begin making payments. 

It can also negatively impact the co-borrower’s credit, and they may find it more difficult to qualify for future loans or refinance existing ones. 

Co-borrowers are quite common in the case of private student loans. But, a cosigner might not realize what could happen if you don’t pay your student loans.


6. Loans go to collections

Another potential consequence of defaulting on a private student loan that the lender may send your debt to a collection agency. 

The agency will charge additional fees when trying to recoup the money. They usually add up to 25% more than what you owed initially on your principal, which only compounds the problem and puts you deeper in debt. 



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