How to Handle a Late Student Loan Payment

So you’ve missed a student loan payment. Maybe the month just flew by, or perhaps money is especially tight. Now it’s time to fix that late student loan payment and make things right. After all, missing a payment can mean serious consequences if you don’t act quickly.

Here’s what you need to know:

What happens when you’re late on student loan payments

The timeline of how a late student loan payment is handled will vary from lender to lender. If you’re dealing with a private student loan, your loan contract should explain the process. Similarly, the Department of Education explains on its Federal Student Aid website how late payments get processed.

As soon as you have missed a payment, your student loan status changes from “current” to “delinquent.” You will not be changed back to “current” until you take action either by making that payment or requesting a deferment or forbearance.

In fact, recent data showed that roughly 11% of federal student loans were 90 days or more past due. If you have a late student loan payment, you must act fast because there could be major consequences.

Late fees from a missed student loan payment

During the first month of a missed payment, you may be charged a late fee penalty. When this occurs — and how much of a hit you’ll take — depends on the loan servicer.

For example, a $400 student loan payment may be charged a 5% late fee after 30 days, which means you could owe up to $20 extra. And late fees continue to add up as long as your account is delinquent.

Late student loan payments and your credit score

A late student loan payment could result in your servicer reporting the delinquency to the three major credit bureaus.

After 30 days

Some federal student loan servicers may charge a fee as soon as you miss a monthly payment, while policies for private lenders vary widely, so check with them if you think you’ll be late.

After 90 days

Servicers for federal student loans report after 90 days, while the policy for lenders and servicers of private student loans varies.

A late student loan payment on your record will reduce your credit score and may affect your ability to take out new credit (such as getting a new credit card or car loan). If you have credit card debt, you may also see your interest rates rise.

In other words, that one missed student loan could affect the rest of your debts.

After 270 days

After 270 days of having a late student loan payment, your federal student loan goes from “delinquent to “default.” Note that with private student loans, this can happen even sooner.

Defaulting on a student loan is a huge deal. Unlike delinquency, defaulting means your student loans are due in full, along with any accrued interest or fines and penalties (such as fees charged by collection agencies).

Late student payments and wage garnishment

Additionally, the government can begin garnishing your wages or even take your tax return in order to cover the costs of your missed federal student loan payment. And, believe it or not, your student loan servicer (federal or private) or a collections agency could sue you.

If someone helped you get the loan, delinquency and default can be incredibly damaging for the cosigner as well. Delinquency on a cosigned student loan can severely impact the cosigner’s credit, and collections may come after them or their property to recoup the loss.

What to do when you’re late on student loan payments

No matter how late you are on your student loan payment, there are steps to take to help remedy the situation:

• Reach out to your lender or servicer and admit your mistake.
• Let them know about any financial hardships. If you have a late student loan payment because of a medical emergency, job loss or another unforeseen event, your servicer or lender may be able to help.
• Consider applying for deferment or forbearance to possibly postpone or reduce your payments based on your situation.
• If you have federal student loans, income-driven repayment plans are an option that could push your monthly payment to as low as zero
• Consider a student loan late payment forgiveness program.

If you just want to get your student loan payment back to current, your service representative can walk you through the steps you will need to make, including any fees you will need to pay, somewhat like a late payment forgiveness program for your student loan.

How to avoid late student loan payments

Late student loan payments happen. Whether you were unable to pay this month or you simply forgot, it’s time to set up strategies that can help you avoid the hassle again in the future.

Set up auto pay

Your best course of action is to set up automatic student loan payments. Lenders love when you sign up for automatic payments — so much so that they may offer a reduction of your monthly interest rate for signing up, usually a quarter of a percentage point.

And if your credit took a hit because of a late student loan payment, having a consistent, automatic payment can help your score bounce back more quickly.

Ask about payment deferment

If automatic student loan payments aren’t an option, consider changing the due date of your student loan to a date that lines up with your paycheck. Many student loan providers will give you this option.

Use calendar alerts and reminders

Another strategy is to simply organize your finances in a way that will help you better remember due dates. If you are not great at keeping track of paper mail, sign up for e-statements or email notifications of your loans’ due dates. If you rely on your phone to keep your dates straight, set up calendar alerts (or even an alarm) that will consistently remind you that your payment is due.

Final thoughts on missing or late student loan payments

If you’re panicked about missing a student loan, don’t freak out just yet. The sooner you realize and own up to your mistake, the faster you can take care of your debt.

Letting a late student loan payment spiral out of control can have disastrous consequences for your money, your credit score and your future. With the help of income-driven payment plans or other payment options such as refinancing, you can find a plan that will work for you.