The grace period is over—don’t let missed payments ruin your financial future!

  • The ‘on-ramp’ grace period for student-loan borrowers is ending, leading to potential credit score impacts.
  • Missed payments will start being reported to credit bureaus, affecting borrowers’ credit scores.
  • Approximately 30% of borrowers are currently past due on their payments.
  • Late payments can reduce credit scores by 49 to 82 points, depending on credit history.
  • Borrowers are advised to act early to avoid negative credit reporting.

As the one-year grace period for student-loan payments comes to an end, borrowers need to be aware of the potential impact on their credit scores. The Education Department’s ‘on-ramp’ period allowed borrowers to miss payments without facing negative credit reporting, but that protection is about to expire. Starting soon, credit-reporting companies will receive information about missed, late, and partial payments from student-loan servicers. This change comes at a challenging time, as many borrowers are already struggling financially. nnCurrently, about 30% of student-loan borrowers are behind on their payments, while around 40% are up to date. Some borrowers may have delayed payments in hopes of debt cancellation or because they knew there were no immediate credit consequences. However, once the grace period ends, missed payments will start affecting credit scores, which can have long-term financial repercussions. nnTypically, student-loan servicers report missed payments to credit bureaus 90 days after the due date, unlike other loans that report after 30 days. This means that if a payment is due on October 15, it won’t be reported until January 15 at the earliest. Borrowers who enter repayment plans or consolidate their loans before the 90-day mark can avoid negative reporting, but those who wait too long may see a drop in their credit scores. nnFinancial experts warn that a default on student loans can lower a credit score by an average of 49 to 82 points, while consistent on-time payments can improve scores by 3 to 8 points. With the average credit score in the U.S. hovering around 702, maintaining a good score is crucial for securing favorable loan terms. nnAs interest rates begin to ease, borrowers with lower credit scores will face higher costs for loans. For instance, a person with a score of 720 could pay a 20% interest rate on a $10,000 loan, while someone with a score between 600 and 659 might face a 28% rate. nnIn light of these changes, borrowers are encouraged to take proactive steps to manage their payments and protect their credit scores. The resumption of credit reporting for student loans could significantly impact younger borrowers, who are already facing higher delinquency rates. It’s essential to stay informed and act quickly to avoid the pitfalls of missed payments.·

Factuality Level: 7
Factuality Justification: The article provides a detailed overview of the implications of the end of the student loan payment pause on credit scores, supported by expert opinions and data. However, it includes some tangential information and could benefit from a more concise presentation. While it generally avoids sensationalism and misleading information, there are moments where the language could be interpreted as slightly dramatic, particularly in discussing the consequences of missed payments.·
Noise Level: 7
Noise Justification: The article provides relevant information about the impact of student loan payment resumption on credit scores, supported by data and expert opinions. It discusses the consequences of missed payments and the broader economic context, but it could benefit from deeper analysis of long-term trends and systemic issues.·
Public Companies: TransUnion (TRU), Equifax (EFX), Experian (EXPGY)
Private Companies: Self Financial,Student Loan Servicing Alliance,VantageScore
Key People: Monique White (Head of Community at Self Financial), Liz Pagel (Senior Vice President of Consumer Lending at TransUnion), Scott Buchanan (Executive Director of the Student Loan Servicing Alliance), Rikard Bandebo (Chief Economist at VantageScore)

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Financial Relevance: Yes
Financial Markets Impacted: The article discusses the impact of student loan payment delinquencies on credit scores, which can affect borrowing costs and market behavior, particularly in consumer lending.
Financial Rating Justification: The article addresses financial topics related to student loans, credit scores, and their implications on borrowing costs, making it relevant to financial markets and consumer finance.·
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: The article discusses the resumption of student loan payments and its implications on credit scores, but it does not report on any extreme event that occurred in the last 48 hours.·
Move Size: No market move size mentioned.
Sector: All
Direction: Down
Magnitude: Large
Affected Instruments: Stocks

Reported publicly: www.marketwatch.com