Missed student loan payments set to affect credit scores again by the end of 2024: Here’s how to prepare

When student loans restarted in October of last year, many borrowers were less than excited. The one saving grace for those struggling to keep up with these payments was the 12-month "on-ramp" where missed payments wouldn’t affect credit scores or result in default.

This on-ramp was intended to make restarting payments less of a burden on borrowers, but it’s quickly coming to a close. On September 30, any missed payments or partial payments will result in the usual consequences borrowers saw before the student loan pause.

These consequences include dings to borrowers' credit scores, loan default, collection calls and garnished wages if non-payment continues. This reinstating of consequences for missed student loan payments is likely to cause difficulties for many borrowers.

"If we take away the pause, it's fair to presume that a lot more stress will come, people will change their financial behaviors, and they probably won't be able to save as much or even spend as much on things," said Dan Collier, University of Memphis assistant professor of higher and adult education. "For older borrowers, that means retirement. For younger borrowers, that means emergency savings or investments for future income."

To see what you'd pay on a refinanced private student loan – either with or without a cosigner – visit Credible to view a rates table that allows you to compare fixed and variable rates from multiple lenders at once.

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Biden-Harris administration providing more student loan forgiveness

While the end of the 12-month on-ramp may be bad news for some borrowers, the Biden administration is taking other actions to address the student loan crisis.

Most recently, the White House released a statement announcing that borrowers who took out $12,000 or less in loans, were enrolled in Biden’s SAVE Plan and made payments for the last 10 years will have their loans forgiven in February.

With 6.9 million borrowers enrolled in the SAVE Plan, this announcement could result in forgiveness for a huge number of borrowers. Those who are part of the plan will see this forgiveness happen automatically, with no necessary actions required on their part.

On top of this forgiveness, an additional 74,000 borrowers are eligible for debt cancelation under another forgiveness plan. A majority of the borrowers who will see forgiveness through this announcement are teachers, firefighters and healthcare professionals.

"My Administration is able to deliver relief to these borrowers – and millions more – because of fixes we made to broken student loan programs that were preventing borrowers from getting relief they were entitled to under the law," President Biden stated in a press release.  

These individuals will earn forgiveness through the public service program that forgives debts for those in public service jobs who have made payments for at least 10 years. Many of those who will see forgiveness have paid longer than 10 years but never received the debt cancelation they were promised.

With these announcements, under Biden’s administration, 3.7 million Americans have received partial or complete debt cancelation.

If you are looking to reduce your monthly student loan payments, refinancing could be an option for you. Use Credible to compare student loan refinancing rates from multiple private lenders at once without affecting your credit score.

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How to manage your student loan debt

Rather than dealing with the consequences of missed payments once the on-ramp ends, preparing now can help borrowers avoid negative financial consequences. While student loan debt can be difficult to overcome, there are steps all borrowers can take before deciding to avoid payments:

• Refinance student debt: Refinancing student loans helps borrowers combine their loan payments into one with a lower interest rate, reducing the overall cost of borrowing.
• Enroll in Biden’s SAVE Plan: Biden’s SAVE program is an income-driven repayment plan that’s designed to lower borrowers’ monthly student loan payments and eventually leads to forgiveness for many.
• Explore deferment or forbearance: Just because the federal student loan pause has ended doesn’t mean borrowers can’t explore other deferment or forbearance options, which would temporarily pause payments.
• Take up a side hustle: Sometimes the only way to make the necessary payments is to make more money. Side hustles provide extra income that can be directed toward loan payments.
• Look at all payment options: There are numerous low-payment and forgiveness paths for student loan borrowers. Income-driven repayments are based on a borrower’s income and are often low-cost options, but there are also pay-as-you-earn options and public service forgiveness programs that reward borrowers who work in certain industries.

An online marketplace tool can be handy for comparing student loan refinancing rates. Visit Credible to speak to a student loan expert and get all of your questions answered.

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