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Miss A Student Loan Payment? Where To Find Help And What Happens

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

If you’ve missed a student loan payment or are struggling to make payments, you’re not alone. According to the Department of Education, millions of loans are currently delinquent, with many more being sent to collections every day.

What happens when you can’t afford to make a payment, and subsequently miss the due date? If you have federal student loans, at first, you’ll be delinquent. Nine months after you miss a student loan payment, your loans will then enter into default status.

If you have private loans, there’s no “grace period” of delinquency; your loans are immediately in default the day after your payment was due.

While this might sound like bad news, there are ways to recover from delinquency and default. We’re covering what the consequences are, and what options you have to get your loans current again.

What Does Being Delinquent Mean and What Are the Consequences?

Do you remember that promissory note you had to sign every semester when taking out student loans? That note was a binding contract in which you promised to make timely payments on your student loans (among other things). By missing a payment, you are in direct violation of that contract.

The day after your payment is due, you are considered delinquent on your student loans. During your delinquency, your student loan servicer will attempt to get in touch with you in the first 15 days following a missed student loan payment.

Your credit score can also suffer if you don’t make any payments within a certain time. For example, My Great Lakes will report a lateness to the 3 major credit bureaus (Experian, Equifax and TransUnion) once an account is 60 days past due, but Nelnet will wait 90 days. Different servicers have different guidelines for this, so it’s best to call yours directly to ask them for the specifics.

Even if you become current on your loans, the delinquency can remain on your credit report for up to 7 years.

Additionally, you might incur late fees if you don’t make an effort to pay within a set time frame. Late fees vary by lender, and the amount of time passed before getting hit with a late fee also depends on the lender.

While being delinquent isn’t great, it’s not the end of the world. Simply making a payment will bring your loan into repayment again.

But what if you can’t afford that payment?

After nine months of missed payments, your loan will go into default. Nine months is a considerable amount of time to work with your student loan servicer in an attempt to lower your payments, and that’s exactly what you should do.

Steps You Can Take To Get Out of Delinquency

If you’re delinquent on your student loans, the absolute best thing you can do is to get on the phone with your student loan servicer and explain your situation to them. You want them on your side in this process, and most are willing to help you out. Many servicers have information and options on lowering payments directly on their website.

If you can afford to make any sort of payment, do so. This will show your loan servicer that you’re concerned and making every effort to rectify your delinquent status.

The worst thing you can do in this situation is to ignore what’s going on. You have 9 months in which to make things right before going into default, and you want to do everything in your power to make sure you don’t get reach that point.

When speaking with your loan servicer, ask them to review your payment options.

Under certain circumstances, you may be eligible for deferment or forbearance. Both will excuse you from having to make any payments for a set amount of time. Interest doesn’t continue to accrue if your loans are in deferment, but it will accrue in forbearance.

Typically, forbearance is easier to qualify for than deferment, and there’s no limit to how many months you can ask to stay in forbearance. But because interest accrues, and you’re not making payments, your loan balance will grow every month you’re in forbearance.  But you won’t have any negative marks on your credit report.

If you’re not eligible for either of these options, don’t lose hope. There are several different income-based repayment options out there, including Pay as You Earn, Income-Based Repayment and Income-Contingent Repayment, and your student loan servicer will point you toward the one that makes the most sense for you.

Your number one priority when your student loans are delinquent is to get them current as soon as possible so that they don’t go into default.

What Consequences Does Defaulting On Your Student Loans Have?

If you haven’t been able to make any payments toward your student loans in 9 months, and haven’t reached out to your servicer, then you will end up defaulting on your student loans.

There are serious consequences to defaulting:

  • Some loan holders will require your entire balance to be paid in full. This includes the principal and the interest.
  • You become ineligible for deferment, forbearance, or any repayment programs.
  • You become ineligible for further federal student aid.
  • Your wages can be garnished, plus your tax return can be held to repay your loans.
  • Your credit score will be damaged.
  • You might end up responsible for more than just your loan balance if there are late fees, collection fees, or court fees involved.

These all sound a little scary, don’t they? While defaulting on federal student loans shouldn’t be taken casually, there are ways to improve your situation.

Options for Getting Your Loans Out of Default

In order to get your loans out of default status, you have to make a plan. The unfortunate part is that you have significantly less options than you would in delinquency, and the options you do have require you to be able to make payments.

MyEdDebt.com is a great resource for those looking for more information on getting their loans out of default. The site is run by the Department of Education and highlights its Rehabilitation Program as an option for getting loans out of default.

MyEdDebt

Going through a rehabilitation program is your best chance at redemption. Upon successfully completing the program, all the negative consequences of defaulting will be reversed. That even includes the damage to your credit score (the default will be erased).

Successful completion involves making 9 monthly payments out of 10 months, so it’s important that you can make the payments according to the plan you’re given. You have to make the payments monthly; lump-sum payments or extra payments will not speed up the process.

A debt collector creates your repayment plan during rehabilitation. They’re supposed to work with you to create a manageable repayment plan, though some of them have wrongfully tried to get borrowers to pay back more than they can afford.

[3 Steps to Handle Being Mistreated by a Student Loan Servicer]

StudentLoanBorrowerAssistance.org has highlighted the importance of paying back only what you can reasonably afford, as a new system was put into place this past July. Under this system, the amount you must pay should coincide with what you would be paying under the Income-Based Repayment formula. For “not new borrowers” this is generally 15 percent of your discretionary income, but never more than the 10-year Standard Repayment Plan amount. For “new borrowers”, it’s 10 percent of discretionary income.

New borrowers are defined by:

“… (1) no outstanding balance on a Direct Loan or FFEL program loan as of October 1, 2007 or has no outstanding balance on a Direct Loan or FFEL program loan when you obtain a new loan on or after October 1, 2007, and (2) received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan on or after October 1, 2011, or received a Direct Consolidation Loan based on an application received on or after October 1, 2011. However, you are not considered a new borrower if the Direct Consolidation Loan you receive repays loans that would make you ineligible under part (1) of this definition.”StudentLoans.gov.

[Read more about repayment plans and student loan forgiveness here.]

Once you’ve gone through the rehabilitation program, a lender must purchase your loans in order for them to enter back into standard repayment status. Likewise, only after a lender has purchased your loans will the collection agency ask the credit bureaus to clear your credit report of the default.

Just note that you may only go through the rehabilitation program once. If your loans fall back into default, then you won’t be eligible for the program.

What About Defaulting on Private Student Loans?

Private student loans are a different beast. There’s no delinquency period associated with private loans; as soon as you miss a payment, your loans have defaulted.

Unfortunately, private loans don’t offer the same protection as federal loans do. Therefore, the repayment options associated with federal loans don’t apply for private loans.

Even worse, there aren’t any rehabilitation programs to go through for private loans, unless your lender offers such a program. It’s worth it to ask!

For instance, Discover will report your loan as late to credit bureaus during its monthly account audit, so there isn’t necessarily a time frame to consider. If you missed a payment that was due on the 10th, and their audit is on the 20th, it might take some time to be reported as late. At that time, your loan is also considered to be in default. The good news is that there are no fees associated with their loans, even late fees, which is reflected on their student loans page.

Wells Fargo reports a loan as late after 30 days have passed, and their standard late fee is $28, though this largely depends on the type of loan you have.

For Citizen’s Bank, private student loans are serviced through Firstmark. Their loans are reported as late after being 30 days past due (from the last business day of the month). The loan is considered defaulted after 120 days past due, and late fees (5% of the borrowed amount) are incurred after the loan is 15 days past due.

According to Sallie Mae, depending on the type of loan you have, you’re considered to have defaulted after 6 to 9 months of no payments.

Fortunately, there are some private lenders coming around to the fact that borrowers need help. Wells Fargo is one private lender willing to lend a hand. If you’re having trouble making payments, they offer additional repayment options, and they also have a new loan modification program which can lower your payments temporarily or permanently.

Sallie Mae offers borrowers interest-only payments on certain loans, and they also offer a graduated repayment option on their Smart Option Student Loan.

Discover also offers deferment options to those serving in the military, in public service jobs, or in a residency program.All lenders encourage borrowers to call if they’re having trouble making payments under their current repayment terms. But you should work under the assumption that once you’re 30 days late it will show up on your credit report, which can stay there for seven years.

The Consumer Financial Protection Bureau has attempted to strip away some of the uncertainty and confusion surrounding student loans, but according to a recent report, the industry remains unchanged. More and more complaints are being received concerning private loans, as borrowers claim they don’t have enough information about the options they have.

The CFPB is encouraging borrowers to use a template that they have available for download to try and negotiate a repayment plan with their lenders. This should be done as soon as you miss a payment, as your private lender will sell your loan to a collection agency after enough time has passed without a payment. They will be more willing to help you than a collection agency will.

As a last resort, you may be able to get your private student loans discharged in bankruptcy. Private loans are slightly easier to get discharged than federal loans. If you’d like to read more about that process, StudentLoanBorrowerAssistance.org has a comprehensive write-up on it.

Final Recap

You want to avoid defaulting on your student loans at all costs, so if you’re delinquent on your loans, get in touch with your loan servicer to figure out the best way to bring your account current. If you’ve already defaulted, check with your loan holder to see if you can enter into a rehabilitation program. If you have private student loans, contact your lender immediately to find out if you can negotiate more manageable repayment terms. These options are available to help you, and there is no shame in taking advantage of them.

Looking to refinance your student loans and lower your monthly payment? Check out our top picks for refinancing student loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
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Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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College Students and Recent Grads

5 Private Student Loans That Offer a Grace Period

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Graduating college, trying to get a job and figuring out how to navigate adulthood feels overwhelming enough. Who wants to throw in making student loan payments? That’s where the grace period for student loans comes in.

Unfortunately, this financial breathing room isn’t always available. It’s common for federal student loans to come with a six-month grace period, but private lenders are not required to offer this buffer time. Still, even with private debt, some banks and credit unions are kind enough to extend the courtesy of a student loan grace period.

Which student loans have grace periods?

As mentioned, most federal student loans have a standard six-month grace period, with PLUS loans being the exception. (Federal Perkins loans used to come with a standard nine-month grace period, but the program expired in 2017.)

With private student loans, on the other hand, there is no standard grace period. Just as with other loan features, the grace period terms, if any, will vary by lender. You will need to read your specific loan documents to know whether your private loan has a grace period, or you can call your lender directly to ask.

Note that some private lenders might use another term instead of “grace period,” or they might not use a term at all and simply say that your first loan payment is due a certain number of months after graduation. Either way, though, it would amount to the same thing.

5 private lenders with grace periods for student loans

While your specific private loan agreement will determine whether you have a grace period, there are several lenders that state upfront on their websites that they do offer grace periods on student loans.

1. Discover

Discover’s website says: “All Discover Student Loans provide you with a grace period — a period of time when you are not required to make your full (principal + interest) monthly payments, which begin when you enter repayment. Depending on your loan type, full monthly payments are not due until 6 or 9 months after you graduate or your enrollment status drops below half-time.”

With Discover, if you have an undergraduate private loan, your grace period is six months long. For private student loans to pay for a professional degree, such as a law degree, medical degree or MBA, your grace period is nine months long.

For borrowers with more than one loan type, Discover may align your repayment start dates and periods so that they are on the same schedule.

2. Wells Fargo

Wells Fargo offers grace periods for some of its student loans. Specifically, the bank’s website says:
“With most Wells Fargo private student education loans, you start making payments six months after you graduate or leave school, although for some loans like the Wells Fargo Student Loan for Parents and the Wells Fargo Private Consolidation loan, payments begin once the loan funds have been sent.”

Make sure to read your loan documents to determine if your private student loan from Wells Fargo does include the six-month grace period. And if you do have any questions or uncertainty about the grace period, ask the lender — ideally, before signing.

3. Citizens Bank

The Citizens Bank website states the following:
“With our Citizens Bank Student Loan … no principal or interest is due while you are still enrolled at least half-time. Payment begins 6 months after graduation.”

Citizens Bank (like Wells Fargo) does not call this period between graduation and repayment a “grace period,” but the website does say that payment begins after a six-month period. Still, as with the other lenders on this list, speak with the bank to make absolutely sure when you’re expected to start sending in payments.

4. Sallie Mae

Sallie Mae’s website says that for the Sallie Mae Undergraduate Smart Option Student Loan, “you have six months after you leave school (your grace period) before you begin to make principal and interest payments.”

With this particular loan from Sallie Mae, you should have a six-month grace period before your loans enter repayment. Note that the lender also offers the option of interest-only payments or fixed $25 monthly payments while in school if you want to avoid interest from piling up during that time.

5. PNC

The PNC Solution Loan for undergraduates also has an optional grace period, according to the PNC website.

Specifically, the lenders says, “If you choose to defer payments, repayment begins six months after you graduate.”

Will my loan accrue interest during the grace period?

Bear in mind that you will probably end up adding to the amount you owe during that grace period, due to interest accumulating.

Some federal loans also rack up interest during grace periods (such as unsubsidized direct loans), though a few do not (like subsidized direct loans). But with private student loans, your debt will very likely accrue interest during the grace period.

How can I minimize the impact of interest?

If you want to stop your interest from capitalizing (in which unpaid interest is added to the principal of the loan), you can make interest payments during your grace period.

As mentioned, the private loans from the lenders listed above will likely accrue interest during the grace period. If you’re hoping to save as much as you can on your student debt, however, you can speak with your lender to see what options are available. Usually, small payments during school or while the grace period is in effect can cut down on those interest costs.

Again, speak with your lender to know how interest on your loan will work before signing on the dotted line.

When grace periods are over

It’s important to remember that should you choose to consolidate your student loans, you’d lose any of your remaining grace period. And once you use it up, it’s gone for good. That’s when it’s time to start paying back your loans.

If you aren’t able to get a private loan with a grace period, don’t panic: Repayment may start a little sooner for you than it will for others, but you have a lot of time to prepare for that inevitability. Plus, the faster you start paying back what you borrowed, the faster you’ll pay it off.

Grace periods: overview

  • The grace period is the time after leaving school when you don’t need to make payments toward your student loan.
  • Grace periods for federal loans tend to last six months. The timing for when you’ll have to start repaying private student loans, however, will depend on your loan terms — there is no standard.
  • The terminology that lenders use to describe this buffer before repayment starts might not include the phrase “grace period,” so be sure to read your loan documents carefully to know what’s expected.
  • Paying off any accruing interest during your student loan’s grace period will save you money in the long term.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at [email protected]

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How To Know If Your Student Loans Are Private or Federal

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

How To Tell If Your Student Loans Are Private or Federal

When you borrowed money to pay for college, you may not have paid much attention to the difference between federal and private student loans. You might not know who your student loan servicer is, or if you do, you may wonder for example whether that loan listed under Nelnet is federal or private.

In fact, it’s completely reasonable to ask why the difference between private and federal student loans matters in the first place.

There are a few ways to see if your student loans are private or federal — here’s how, along with what makes each different, and why knowing which type of loan you have is important.

What makes federal and private student loans different?

Federal student loans are offered through the Department of Education. Typically, these loans are easy to qualify for. For many federal student loans, your credit isn’t even checked.

There are four different federal student loan programs currently available:

  • Direct subsidized loans: These loans are awarded based on your financial need. When you apply for federal financial aid, your eligibility for subsidized loans is also considered. “Subsidized” here means that interest isn’t charged until after you graduate or drop below half time.
  • Directed unsubsidized loans: Anyone can receive an unsubsidized loan — they aren’t based on need. However, unsubsidized loans will put you on the hook for interest charges that accrue while you’re in school.
  • Direct PLUS loans: These loans are specifically for graduate students or for parents of undergraduate students taking out loans on behalf of their child. These loans aren’t based on financial need, and a credit check is required.
  • Direct consolidation loans: This type of loan allows you to combine all your federal student loans into one, giving you one manageable payment each month rather than many. Your new interest rate is the weighted average of all your loans, rounded up to the nearest one-eighth of a percent.

Private student loans, on the other hand, are offered by private lenders and have different repayment requirements compared with federal student loans. For example, private student loans can offer fixed or variable interest rates, while federal student loans only offer fixed rates.

Because the features of private loans vary from lender to lender, eligibility will depend on the bank, credit union or online financial institution that you borrow from.

Most borrowers usually favor federal student loans, given the flexible repayment options and debt-forgiveness programs they come with. But since federal loans also have borrowing limits, students may need to turn to private loans to help fund any remaining costs, and in a few cases, a private loan might have a better interest rate than their federal equivalent.

How to determine if your loans are federal

The first thing you should do to see if you have federal loans is log on to the National Student Loan Data System. The only loans listed here are federal.

If you’ve never used the NSLDS before, you’ll want to click the “Financial Aid Review” button on the homepage, hit “Accept,” and then enter your credentials.

If you have a Federal Student Aid (FSA) ID, you can enter it here. If not, there’s an option to create one. In May 2015, the government redesigned its student loan system, and you can now use your FSA ID to log on to multiple government sites. But if you haven’t visited in a while, you might need to create one.

In the event you forgot your credentials, you can click the “Forgot my username/password” button and have the information emailed to you or answer a challenge question. You’ll just be required to enter your Social Security number, last name and date of birth.

Once you log on, you’ll see a list of all the student loans that were disbursed to you. This page will also show you what your original loan amount was, and how much you currently owe.

Click on the numbered box to the left of your loan to determine your loan servicer. This will display all the information about that particular loan. Your loan servicer will be listed under the “Servicer/Lender/Guaranty Agency/ED Servicer Information” section. The name, address, phone number and website should all be displayed.

Additionally, this page will also inform you of your loan terms. Along with your original loan balance and current outstanding balance, it will tell you what the interest rate is and the current status of the loan.

How to determine if your student loan is private

As discussed, private student loans are loans not made by the government — banking institutions, such as Sallie Mae, Wells Fargo, Citizens Bank and others offer them. As a result, there are more lenders to look out for when it comes to private loans.

Unfortunately, there’s no central reporting system for private loans like there is for federal loans, which makes them slightly more tricky to track down.

Your first stop should still be the NSLDS to at least see if you have any federal loans. In 2015, just 5% of undergraduate borrowers had private student loans, so your student loans are more likely to be federal than private.

But in order to make sure you have no outstanding private student debt, you’ll want to take a look at your credit report. You can view your reports from the three main credit bureaus for free by visiting AnnualCreditReport.com.

Some lenders may not look familiar to you. Searching the lender’s name online may help you find out who the parent company is. Don’t hesitate to call the numbers available on your credit report if you’re still unsure.

If you graduated a while ago, some older loans may look unfamiliar. You might see “federal direct loan,” “federal Perkins,” or “Stafford” on your report — these are federal loans, so ensure they match up with what’s in your NSLDS file.

You might also be able to call your school’s financial aid office to see if they have records of your loans.

What should you do once you find out?

Knowing whether your student loans are private or federal can be important as you repay you college debt.

For example, knowing the difference is crucial if you ever decide to refinance or consolidate your student loans. You can only combine your debt under a direct consolidation loan if you have federal loans. Likewise, refinancing through a private lender will cause you to lose access to federal repayment and forgiveness programs, while private loans would be unaffected.

So, by knowing which type of student loans you have, you’ll get a better idea of what options you have to knock them off.

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Dori Zinn contributed to this report.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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