Paying off student loans is a long-term process that over 43 million Americans have committed to. However, student loans have proven to be a seemingly never-ending financial burden that has everyone— students and graduates alike—holding their heads in their hands at the mere mention of student loans.
In fact, only about 24% of adults in the United States report that they have completely paid off their student loan debt, whether private or federal.
Your student loan servicer isn't the only one who monitors your monthly payments. Any late payment you make on your student loan is also noted in your credit history by the three major credit bureaus: Equifax, Experian, and TransUnion.
While student debt can be daunting on anyone's debt summary, it is good to know that it’s not meant to stay on your credit permanently.
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How long does it take to get student loans off your credit?
You can expect your student loans to stay on your credit report during the entire duration of the repayment term, which can differ for everyone depending on your chosen repayment plan. However, what remains on your credit after the repayment term is where things differ: your loan balance and your loan payment history are two separate things on your credit.
In terms of loan balances, student loans remain on your credit until:
- You pay off the entire loan amount in full. Or,
- The loan balance is forgiven— as part of a forgiveness program.
In terms of payment history, information about loan payments and certain loan statuses may remain on your credit for up to 10 years even after the loan account is closed and the loan is paid off completely. Luckily, this does not apply to negative information that may be hurting your credit, which will be removed sooner, at seven years after the first missed payment/the student loan defaulted.
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Federal student loans
Federal student loans go into default after nine months of non-repayment while you're not in deferment or forbearance. Once that status appears on your credit report, the negative information will remain on your credit report for an additional seven years before the loans fall off your credit report.
Luckily, borrowing from the federal government gives you more options to reduce or repay your federal loans from your credit reports sooner. But there are some exceptions regarding how long federal loans can stay on your credit report.
Although Perkins Loans are no longer being offered as of 2018 and the Federal Family Education Loan (FFEL) Program ended in 2010, many federal student loan borrowers may have fallen victim to their loan terms.
The consequences of missing payments on a Perkins Loan are severe and last much longer on your credit reports— remaining on your credit reports until the loan is paid in full. Both Perkins Loans and FFELs are also ineligible for many federal loan forgiveness programs.
Private student loans
The bad news: it might be easier for negative information to appear on your credit report when paying off private student loan debt. Private student loans usually go into default after only around 120-180 days of nonpayment, but the negative information stays for the same seven years as all other negative loan information does.
Although there are fewer repayment options for private student loans compared to federal student loans, still talk to your student loan servicer about how to prevent your private student loans from defaulting. If you maintain good standing, the private loans will fall off your credit once they are paid off.
Defaulted student loans
The first missed payment is only the start. Continuing to miss payments is only building a poor track record. If you reach the point of default status on your student loans, your credit will suffer greatly from it.
Defaulted student loans are a bad look on credit reports. However, with defaulted loans, the big credit bureaus remove the default status and late payments from your credit seven years after the first missed payment.
Rather than carrying a defaulted student loan on your credit for up to seven years, it is best to avoid student loan default at all costs. If you can’t afford your payments because you lost your job, became ill, or have another financial crisis, you can use a forbearance or deferment to temporarily postpone your payments.
While private loans usually don’t have alternative payment options, you can work with your student loan servicer to lessen your monthly payments. You may be encouraged to try loan rehabilitation or loan consolidation. Check out our blog on what happens if you default on student loans for more information.
How do student loans affect your credit score?
A credit score is a fundamental factor that affects your financial life. Student loans affect your credit score. You can imagine what happens if you don't pay off your student loans.
Student loans can either help or hurt your credit score, depending on how you handle monthly payments. On-time payments tracked in a positive credit history will improve your score and keep you in good standing, while late payments reported to the three major credit bureaus will drop your score.
Personal finance can be a tough thing to navigate. It's common for many borrowers to steer off from their timely payments on occasion. To learn more about how your student loans are affecting your credit score, check out our blog on how paying a student loan builds credit.
How can I improve my credit score with student loans?
On top of late fees and wage garnishment, late payments on your credit reports can also cause your credit score to drop.
It may be difficult for your credit score to recover, but not impossible. Unlike credit card debt and other types of loans, there are many repayment options for student debt to help you climb your way back to good standing.
Keep up with monthly payments
The quality of your payment history makes up 35% of your FICO score. Staying consistent with your student loan payments is enough to have a positive payment history and improve your credit scores. Try your best to make each monthly payment on time and in full.
Falling into the habit of making late payments can be severe to your credit, but on-time payments can greatly benefit you on your credit report.
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Refinance your student loans from your credit
Refinancing your student loans will collect all or multiple student loans in your credit portfolio into a new, singular loan with a private lender. This will raise your monthly payment but lower your interest rate, saving you more money in the long run.
Take note that doing so to your federal student loans will turn them into private student loans. Refinancing your federal loans means you'll be losing many of the federal benefits that come with them, and you'll lose the chances for longer loan deferment, income-driven repayment plans, and student loan forgiveness programs.
Be sure to compare private lenders' terms and interest rates before taking the next step.
Keep credit utilization low
The utilization rate is the percentage of your credit limit represented by your total outstanding credit debt and other revolving credit accounts divided by the sum of all your credit limits.
Maintaining a low utilization rate can stabilize your credit, preferably keeping it under 10%. Exceeding 30% in credit utilization can hurt your credit, but so does keeping it at 0%.
Look into other repayment plans
Consider talking to your student loan servicer about different repayment options. You may have the option to switch to a repayment plan that may be better suited for your financial situation, such as an income-driven repayment plan based on your discretionary income. Some may offer a lower interest rate or an extended repayment period if needed.
How can I remove student loans from my credit report?
While we all wish we can simply remove student loans from our credit reports, the reality isn't so simple. The only way to remove a student loan balance from loan accounts is to repay the balance completely or get the debt forgiven.
However, negative information related to monthly payments is what can be removed from your loan account. Usually, such information is automatically removed from your credit report after seven years.
For defaulted loans, you can complete a loan rehabilitation program to remove the default status. Alternatively, you can try consolidating your student loan debt currently on your credit report.
But if you notice a late payment or student loan default status is on your credit report in error, you may have to issue an account dispute letter directly to the credit bureaus. Once your loan servicer confirms the negative loan information is incorrect, the credit bureaus will update your credit report accordingly.
Suppose you must contact the credit bureaus to remove inaccurate loan information. In that case, the Federal Trade Commission has a great dispute letter sample you can follow.
Sometimes a closed account can still show up as open in your credit reports. The process to remove closed student loans from your credit report is relatively the same. Be sure to get written confirmation of any corrections and a copy of your dispute letter for your personal records.
Consider crowdfunding for your student loans to kick start your student loan payments.
Frequently asked questions about student loans & credit
Do student loans ever go off your credit?
Although student loans may stay on your credit longer than credit card debt and other types of loans, rest assured that student loans aren't meant to stay on your credit forever.
Student loan debt can be removed from your credit reports at any time for many reasons: whether the debt is forgiven or you paid off your student loans in full. Most borrowers may see a drop in their credit scores the following month after their student loans go off their credit.
However, information about loan payments and certain loan statuses may remain on your credit report for up to 10 years. This is why it's important to maintain a good credit history.
Sometimes closed student loans are slow to update and still show as open on a credit report. If you feel any errors are showing on your credit report, you may have to send a dispute letter to the credit bureaus to remove incorrect information.
Do student loans get forgiven after 20 years?
The average time for student borrowers to fully repay their loans is closer to 20 years, but repayment periods can last well beyond that. Luckily, student loan forgiveness programs will forgive student loan debt after the length of the loan term.
This mostly applies to federal student loans, where you can see automatic forgiveness after 20 or 25 years under certain repayment plans. For private student loans, your options will vary according to the private lenders. Be sure to speak with your private lender to see about eligibility for repayment assistance programs or how to get your private loans forgiven.
Do student loans go away after seven years?
Unfortunately, any remaining loan balance doesn’t magically disappear after seven years. In fact, the average repayment term lasts longer than seven years.
However, with defaulted student loans, the big credit bureaus remove the default status and late payments from your report seven years after the first missed payment. Additionally, you can see automatic forgiveness on your federal student loans after 20 or 25 years under certain repayment plans.
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