It’s no surprise that the average college student graduates with well over $30,000 in student loan debt. However, too many people fail to realize that not paying their student loans, or not paying them in a timely manner, can seriously hurt their credit. A student loan is just like any other loan. It must be paid back according to the terms and conditions that were agreed upon at the time the loan was given.
Paying a student loan is a great way for college grads to build up credit. A good credit history makes it easy to get a car loan or qualify for a nice place to live. A good credit history can also help students qualify for a credit card.
Making Your Student Loans Work In Favor of Your Credit
Unfortunately, there isn’t a magical solution to this. One of the best things that you can do for your credit is to pay your student loans on time and pay off your student loans as agreed. So, for those who feel frustrated by paying student loans, realize that there is something very positive that can come from having student loans.
Additionally, when you make your student loan payments on time each month, the three major credit bureaus will be notified. You will appear to be a responsible, low-risk borrower. That will open more opportunities for you.
What If You Cannot Make Your Payments?
Defaulting on your loan, or just not paying it, is the least desirable option. Defaulting on a loan has terrible consequences for your credit. A loan default will leave you struggling with your credit for years. Not only will it affect your ability to get loans and credit, but some employers and landlords check credit to see how trustworthy you are. Seeing a defaulted student loan doesn’t leave the best impression.
If you find that you are struggling to make your student loan payments, you should contact the lender before you actually fall behind. If you explain your situation, you might be able to negotiate a smaller payment or even get a temporary deferment. When you try to work with the lender, you may be able to protect your credit, which you definitely will not be able to do if you default on the loan.
What About Interest Rates?
You should realize that when you defer on a loan, the interest continues to accumulate. Hence, you will end up paying more in the long run. But, when you can’t make the full payments, or any payments at all (which is more common than you might think), paying what you can and getting through is important enough. In some cases, it can help justify the deferment.
You’ve spent the last several years carefully attending your classes, completing your projects, and making sure you had a great GPA. You don’t want to disregard the next part of your life—becoming a responsible adult with a good credit score. Make your student loan payments on time each month. Slowly but surely, the amount you owe will go down. Someday it will be paid in full!