If you’ve missed a student loan payment, you’re not alone. Around 8 million borrowers defaulted on their federal student loans in 2019. If you have a federal student loan and miss a payment, you’ll be delinquent. If you still haven’t made any payments after nine months, you default on your loan.
If you have a private loan, you don’t get a grace period of delinquency. Instead, you immediately default on your loan the day after the payment was due. While this sounds bad, there are ways to recover from delinquency and default.
What Is Loan Delinquency?
Every semester when you took out a loan, you had to sign a promissory note. Among other things, this binding contract stated you agreed to make timely payments on your loan. When you miss a payment, you violate that contract and are delinquent.
Within 15 days after you miss your payment, your student loan officer will attempt to reach you to remind you of the payment and to discuss payment options.
What Are the Consequences of Delinquency?
When you become delinquent on your loan, you’ll have to pay a late fee if you don’t attempt to make a payment within a certain amount of time. Each lender has a different fee and time frame for when this occurs. Your credit score could also take a hit. Again, different lenders have different guidelines for when they report lateness to the credit bureaus.
Some lenders will report lateness when an account is 60 days past due, while others will wait 90 days. Therefore, you need to contact your lender to find out their policy.
How to Get Out of Delinquency
While being delinquent isn’t good, it’s also something you can remedy. Sometimes simply making a payment will bring your loan out of delinquency.
If you’re having trouble making your payments, contact your lender and explain your situation. Most lenders are willing to help out, and submitting any type of payment will show your lender you’re concerned and making an effort.
Understanding Deferment and Forbearance
One option you might have is asking for a deferment or forbearance. Both options will let you skip payments for a certain amount of time. With a deferment, interest doesn’t continue to accrue when you’re not making payments.
However, it does with forbearance. There are no limits to how long you can stay in forbearance, but since interest accrues, your loan balance will continue to grow.
What Happens When a Loan Defaults?
If you don’t make any payments for nine months or you have a private loan and miss a payment, you default on your loan. This can have serious consequences, including:
- Being required to pay the entire balance in full.
- Becoming ineligible for forbearance or deferment.
- Damaging your credit score.
- Having your wages garnished or having your tax return held to repay your loans.
- Becoming ineligible for future federal student aid.
- Being responsible for paying collection fees, late fees, or court fees.
Being late a loan payment is a serious issue. With this information, you now have a better understanding of what happens when you miss one.