Why am I getting letters about my student loans from different organizations?

Your lender (whether a bank or credit union, school, or the U.S. Department of Education) provided you with the borrowed student loan funds. Many times a lender will employ a servicer to assist in managing a student loan account, which functions can include:

• Sending payment notifications
• Processing the paperwork on payments, deferments and forbearances
• Working with borrowers to determine the best repayment option

If you have missed payments, you may be hearing from organizations other than your lender or servicer. Specifically, you may have received communication from the organization that guaranteed your federal loans to insure them against default—this could include a company like ECMC for FFEL Program loans, or the U.S. Department of Education for Direct Loan Program loans. It’s also possible you have heard from a collection agency.

The best thing you can do is respond to the letters you are receiving. Even though you might not know who is contacting you about your loans or why, they have a reason and you can only benefit by responding to them. These groups want to see you successfully repay your loans, and they are available to help you along the way.

I’ve heard that being late on my student loan payments will affect my credit. How?

You are building a credit score through the repayment of your student loans. Your credit score is based on your financial history—loans you have, amounts you owe, on-time payments, etc. If you are consistently late on your student loan payments, this will be reflected on your credit report. Missing payments or slipping into default will lower your overall credit score, making it difficult for you to get other loans, such as a car loan or a mortgage. Make it a point to pay your student loans on time every month.

What is a credit score, and why does it matter to me?

A credit score reflects an individual’s history of managing credit, and is therefore considered predictive of that individual’s future credit performance. A credit score is a number generally between 330 and 830. To arrive at a single score, a credit bureau assigns numerical values to specific pieces of your personal financial information, such as bankruptcy filings, outstanding debt, late loan/credit card payments, the number of inquiries on your credit history, the number of open accounts, etc. These values are put through a series of mathematical calculations to produce a single number—the credit score. The lower the score, the worse your credit history is and the harder it is to obtain loans for things like a car or a home. In some cases, a low score can also hinder your eligibility for employment.

What's the difference between delinquency and default?

Delinquency occurs when your loan payment is late (also known as past due). If you are delinquent on your loans, there are several options available to you to keep you from default. Just contact your lender to learn more. You can find contact information for your lender by going to the National Student Loan Data System (NSLDS), which is the centralized database for federal student loans.

Default can occur when your loans are delinquent for 270 consecutive days or more. Defaulting on a loan has long-lasting and severe consequences, leaving you with few options to repair the damage. Some of these consequences include not being able to take out additional loans or being ineligible for employment.

Learn more about delinquency.
Learn more about the consequences of default.

Can I lower my monthly payment to an amount that works better for my budget?

As long as you have not defaulted on your student loans, you still have options to change your payment plan. Your lender can work with you to develop a repayment strategy and help you find a repayment plan that will fit your individual financial needs.

If you are delinquent on your student loans, you will first need to bring your loans current before you can change your repayment plan. This can be done by paying the past due amount or requesting deferment or forbearance, if applicable, to cover the delinquent payments.

You need to contact your lender—they are there to help you.

If you do not who your lender is, go to the National Student Loan Data System (NSLDS), the central database for federal student loan information. You will find contact information for the lender of your federal student loans. If you have private or state student loans, refer to the promissory note you signed to obtain the loan, in order to find contact information for your lender.

Can I get federal tax credit for paying tuition or interest on my student loan?

You may be able to take advantage of a number of federal tax benefits, including credits, deductions and savings incentives to offset your costs for college or career training. For more information on the most common benefits - including the student loan interest deduction, download our one-page overview, Federal Tax Benefits at a Glance.

Also, you will find details on all the tax benefits at the Internal Revenue Service website www.irs.gov/publications/p970/index.html.

Where can I get a complete summary of my loans?

If you know who holds all of your loans, you can contact each of those entities to receive a personal loan statement.

If you are unsure who holds each of your loans, visit the National Student Loan Data System (NSLDS), which is the centralized database for federal student loans. If you have private or state loans, you will need to locate your promissory note for those loans or call your school for more information.

Should I consolidate my federal loans?

With a Federal Consolidation Loan, you bundle one or more eligible federal loans—such as Stafford, Perkins or consolidation loans—into a new loan with new repayment terms. Some common reasons to consolidate your loans are to:

• Reduce multiple student loan payments into one single payment
• Lower the interest rate (this is not guaranteed—interest could increase instead)
• Lower your monthly payment
• 
  

That said, consolidation is not a solution for everyone. In some cases, consolidation is actually the most expensive way to repay student loans. See our Loan consolidation section for more information.

To determine if consolidation is right for you, contact your lender. They can help you understand the pros and cons of consolidation as it relates to your situation. If you do not know who your lender is, go to the National Student Loan Data System (NSLDS), the central database for federal student loan information. This website will have contact information for your lender.

What can I expect my lender to do for me?

Your lender is there to help you, whether to explain your options or to make adjustments to your account as needed. You should know the difference between what your lender is required to do for you by law, and what your lender is not required to do.

Your lender is required to honor your grace period, during which time you are not obligated to make loan payments. If you meet the eligibility requirements of a deferment—because you’re in school or unemployed, for example—your lender is required to give it to you. If you qualify for a Mandatory Forbearance, your lender must grant it to you.

However, even if you qualify for a deferment or forbearance, you may still need to apply. Your lender won’t necessarily grant you a deferment or forbearance unless you request it. Additionally, your lender is not required to grant you a forbearance for reasons of financial hardship if your situation does not meet their criteria. Finally, while you may ask your lender to change your due dates or give you a discount for setting up automatic payments, your lender is not required to honor either request. But it’s worth it to ask.

For more information, visit our Working with lenders section.