How Long Can Student Loans Hurt Your Credit?

We get questions and comments from distressed student borrowers wondering exactly how long missteps in repaying their student loans are likely to continue to hurt their credit. It can feel like student loans cast a very long shadow that is hard to escape.

How long student loan problems can affect your credit isn’t always clear, because they don’t all work the same way.

One thing is clear: If you have private student loans, they should be treated like any other negative event, cycling off your credit report after seven years from the date of the late payment. So a negative mark on your private loan (and most federal student loans) will cease to hurt your credit after that time frame.

But there is one type of federal loan — a Perkins loan — that can stay on your credit report until the loan has been paid in full, even if it is longer than seven years. This is not true for other types of student loans. The special treatment of a Perkins loan was a provision of the Higher Education Act. Perkins loans are distributed by colleges, and they are a need-based type of loan, with interest deferred while the student is still in school. No other type of student loan delinquency stays on your credit report until the loan is paid off.

What all education loans, federal and private, have in common is they are extremely difficult to discharge in bankruptcy. And federal loans have to be reported to all three major credit reporting agencies. In most other circumstances, reporting is voluntary. But the Department of Education, guaranty agencies and other federal student lenders must supply information about the total of the loans extended, the balance remaining, and the date of delinquency if the loan is past due or the date of default (270 days late) if you are in default. Student loan expert and lawyer Persis Yu of the National Consumer Law Center says that while there is no requirement to report loans paid on time, lenders are required to report delinquent loans or defaults. So there is little chance that the lender simply won’t report it and your score won’t suffer.

Delinquencies and defaults are reported for seven years, though Yu notes that those can happen more than once, and if that happens, there will be a new negative item that will be on the credit report for seven years.

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How to Protect Your Credit

For students who worry that student loans could hurt their credit in the long term, there are solutions. The first is, if you are late, work out a plan to catch up. If you don’t know how, check into repayment plans, particularly income-based repayment. Even if you are making little or no headway on repaying your debt, on-time payments can keep student loans from damaging your credit. If you are in default, rehabilitate your student loan. If you successfully do so, the default notation will be removed from your credit reports, and some lenders (though not all) also stop reporting the late payments leading up to default. And if you have multiple student loans, you might want to consider consolidating, as it can simplify repayment. Refinancing is another option that can help lower your interest rates and save you money in the long-run. However, it won’t make the original late payment disappear from your credit report — only time can do that. But the more positive information you have, and the more time goes by without any negative information, the less impact it will have.

What you can do in the meantime, though, is try to build your credit with recent, positive information. If you have credit cards, be sure you are paying those on time and keeping your balance low relative to your credit limit (less than 30%, or ideally, less than 10%). Also check your free annual credit reports to make sure everything there is accurate. Mistakes can and do happen, and you can dispute incorrect information and have it removed. Your credit scores are calculated from information in your credit reports, and those help determine your access to credit and the interest you’ll pay to get it. (You can get a free credit score, updated every 14 days from Credit.com; it will also tell you why your score is what it is and how to improve it.)