Millions of student loan borrowers were no doubt hoping to have their debt forgiven as per President Biden's well-intentioned plan. But when the Supreme Court voted down that student loan forgiveness plan at the very end of June, those same borrowers were suddenly faced with the harsh reality that their loan payments would soon resume.
Federal student loan borrowers were given the option to pause their payments during the pandemic given the number of people who were experiencing personal economic hardships. But now, those payments are set to resume this fall, and that's likely to come as a financial shock to a lot of people.
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If you're on the hook for student loan payments, it's important to contact your loan servicer so you understand what payments you'll have due and when you need to make your first one. And you should do everything you can to keep up with those payments. But if you fall behind initially, you may get a bit of a reprieve from a credit score perspective.
Your credit score won't take an immediate beating if you're late
For many people, it won't be an easy thing to work student loan payments back into their budgets. But people in that boat are getting some leeway as far as credit reporting goes.
Normally, any time a given debt payment is 30 days late or more, it's reported to the credit bureaus. And from there, major credit score damage can ensue, since payment history is the factor that carries more weight than any other when calculating a credit score.
But given the tough adjustment to repaying student loans that a lot of borrowers are apt to face, the U.S. Department of Education has directed that student loan delinquencies not be reported to the credit bureaus for 12 months until September 30, 2024. So those who fall behind on payments temporary later this year or early next may not see their credit scores tank if they're able to eventually get current on their debt and keep up with their student loan payments.
That said, while late student loan payments won't be reported immediately, interest will begin to accrue immediately once those payments are due again. So if you have an outstanding loan balance, it's in your best interest to try to make your payments in a timely manner.
If you can't, you have options. You could talk to your loan servicer about getting onto a different repayment plan that makes your debt easier to manage on a month-to-month basis. But do know that shrinking your monthly payments individually will generally result in you accruing more interest on your loans all in.
The fact that student loan debt isn't going to be broadly forgiven may be a point of major disappointment for you. And resuming payments on your loans may be a difficult adjustment. But you can at least rest assured that from a credit reporting perspective, you get a little leeway if you fall behind on a payment here and there as you're getting back into that groove.
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