Oh, boy, folks. Millions of us with student loans may want to brace ourselves – we’re in for a bumpy ride. By this summer, our credit scores could be making a downhill rush that would make any roller coaster aficionado queasy. Why? Beat this: the perks that boosted credit scores like free-flowing coffee during those grim, not-so-good old pandemic days, have now expired. Ouch!
Who Says So?
Well, the sharp folks over at the New York Federal Reserve have been crunching the numbers and guess what they’ve found? Over 9 million borrowers (yes, nine-million!) may see “significant” dips in their credit scores from overdue student loans. Who would’ve guessed, right?
Turns out, while we were holding our breath battling the virus, Uncle Sam was pretty generous, pausing payments and interest accrual on federal loans. And voila! Our credit scores partied, jumping an average of 11 points in 2020 alone, from 662 to 673. Party’s over now, folks.
Why Our Credit Scores Are on Shaky Ground
Ever tried juggling chainsaws? Late student loan payments can have just about the same effect – they can take a sizable bite out of your credit score. During the pandemic relief period, this led to staggering credit score growth for those with defaulted or delinquent loans, boosting the median score from 501 to 575. Crazy, huh?
There was hope though, in 2022, when the federal “Fresh Start” scheme helped defaulters restore their credit scores. We saw scores rise from 564 to 608 by early 2023. So all good? Not so fast! With the pandemic protections exhausted, we’re back to the juggling act as missed payments pop up on credit reports again.
Why the Plunge?
From March 2020 to August 2023, we all enjoyed a student loan payment holiday, sort of like a vacation without the sun or sand. However, missed payments were benevolently ignored during a special “on-ramp” period till September. Unfortunately, times have changed. According to the New York Fed, by 2024, credit scores for those with defaulted or delinquent loans remain higher than they were in late 2019, despite potential drops. But with no pandemic protections in place, late payments, defaults, and delinquencies are now being reported to credit bureaus.
Language matters folks – delinquency and default are not the same thing. Loans overdue by over 90 days are considered delinquent. Default is worse. If you’ve not paid for 270 days, you’re in default territory. An overdue payment can whack your credit score by over 150 points, stay on your record for up to seven years, and jack up the cost of borrowing. Ouch! Again.
Check Out Student Loan Refinance Rates
Sweating over your student loan payments? Worried about your credit score? Beast mode activated and looking for a way out? Refinancing to the rescue! It’s time to scavenge those top student loan refinance lenders to find the best deal for yourself.
Feeling lucky? Here are Today’s Best Student Loan Refinance Offers:
- SoFi: Fixed rates from 4.49% and variable rates from 5.99% APR with discounts. Get pre-approved faster than you can microwave popcorn! They also offer term options (5-20 years) and dedicated wealth advisors.
- Earnest: Fixed rates from 4.49% APR (with autopay), and variable rates from 5.88% APR (with autopay). Say hello to flexible terms, no fees, and the chance to skip a payment annually.
- Splash Financial: Check out your eligible rates without impacting your credit. They’re accredited by the Better Business Bureau with an A+ rating, so rest easy.
- ELFI: Fixed rates from 4.74% APR, multiple repayment options, and A+ BBB rating. They consolidate both federal and private loans.
Refinancing might just be your knight in shining armor. It could simplify your student loan payments, trim your interest rates, and possibly defend your credit score from unwarranted attacks. But hang on, this isn’t a one-size-fits-all solution. Weigh the pros and cons, especially if you have federal loans eligible for forgiveness programs.
Helpful Tip From Yours Truly
Always, always, always keep an eye on your student loan status and credit report, folks! Staying ahead of curveballs that could mess with your financial life is the smartest move you can make.