Do student loans affect my credit score? | Consumer Financial Protection Bureau (2024)

FAQs

Do student loans affect my credit score? | Consumer Financial Protection Bureau? ›

Your student loan amount and payment history are a part of your credit report. Your credit reports—which impact your credit score—will contain information about your student loans, including: Amount that you owe on your loans. Payment history.

Keep in mind, though, that while institutions making student loans are required to report the date of disbursem*nt, balance due, and current status of your loans to a credit bureau, they're not currently required to report the information to all three, although many do.

How student loans affect your credit score. Student loans are a type of installment loan, similar to a car loan, personal loan, or mortgage. They are part of your credit report, and can impact your payment history, length of your credit history, and credit mix. If you pay on time, you can help your score.

Credit card debt, student loans, auto loans, mortgages, and payday loans are all examples of consumer debt. These stand in contrast to other debts that are used for investments in running a business or debt incurred through government operations.

To maintain a low student loan repayment burden, the Consumer Financial Protection Bureau suggests student loan payments should not exceed 8% of your gross salary.

If you don't make your student loan payment or you make your payment late, your loan may eventually go into default. If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability.

Do student loans go away after 7 years? While negative information about your student loans may disappear from your credit reports after seven years, the student loans will remain on your credit reports — and in your life — until you pay them off.

Federal Student Aid

Federal direct loans are available to all college students, regardless of credit score or income, and everyone receives the same fixed rate. All you need to get them is to complete the Free Application for Federal Student Aid (FAFSA).

Yes, you can have student loans and a mortgage at the same time. Like with any type of loan, your ability to qualify for a home loan depends on your credit score and ability to repay.

Defaulted student loans stop showing on your credit report about 7 years after you default. Federal student loans default after 270 days of missed payments. Private student loans typically default or charge off about 120-180 days after your last required student loan payment.

Is a student loan considered a bad debt? ›

Student loans can be another example of “good debt.” Some student loans have lower interest rates compared to other loan types, and the interest may also be tax-deductible. You're financing an education, which can lead to career opportunities and potentially increasing income.

Yes, taking out student loans does affect your credit score. Similar to auto loans or mortgages, student loans are a type of installment debt (a debt that is paid off in a set number of payments) and they affect your credit the same way.

Understanding Delinquency

If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the three major national credit bureaus. If you continue to be delinquent, your loan can risk going into default.

What is considered a lot of student loan debt? A lot of student loan debt is more than you can afford to repay after graduation. For many this means having more than $70,000 – $100,000 of total student debt.

Regardless, one rule of thumb for student debt is that you should try not to borrow more than the first year salary you can expect in your chosen field. This means that if you expect to earn $38,000 in the first year of your career, you should try to borrow $38,000 or less for your degree.

They can be considered good debt because the money you're borrowing to attend school is your ticket to earning a degree and getting hired at a well-paying job. That debt should pay itself off over time with a lucrative career in place.

Student loan interest payments are reported both to the Internal Revenue Service (IRS) and to you on IRS Form 1098-E, Student Loan Interest Statement.

When filing taxes, don't report your student loans as income. Student loans aren't taxable because you'll eventually repay them. Free money used for school is treated differently. You don't pay taxes on scholarship or fellowship money used toward tuition, fees and equipment or books required for coursework.

However, having student loan debt can make buying a home more difficult, as lenders will review your financial situation, including how your debt compares to your income, to ensure you can repay your loan.

As a result, throughout this relief period, set to expire Sept. 30, 2024, borrowers who aren't making payments shouldn't see negative marks related to their student loans on their credit reports, Kantrowitz said.