Student loan debt has become a crisis in the United States. A college education is expensive and the cost is rising. With the average annual tuition between $10,000 and $36,000 for a 4-year degree, it's no wonder why 44 million Americans have outstanding student loan debt. It’s now one of the largest categories of consumer debt in the U.S., totaling more than $1.5 trillion.Of those 44 million people in debt, approximately 10% are in default. With large balances and interest payments, many people find themselves choosing between paying their students loans or paying for rent and groceries.
What Student Loans Mean For Your Credit Score
The large amounts of debt on Americans is alarming, especially because student loans can have a dramatic impact on someone's credit score. Credit Repair Cloud Subject Matter Expert Corey Gray shared some insights about student loan debt and credit.
For example, when borrowers keep their loans in good standing, they can have positive effects like:
- Helping build good credit, as on-time payments make up 35% of your score
- Credit bureaus reward borrowers for maintaining accounts on a long-term basis, and student loan accounts often become one the borrower’s oldest accounts
- Offering a good mix of credit types, which is important for a good credit score
The reality is, though, that many students come out of college and into “the real world” with crushing debt amounts even before they find jobs. If they miss a payment, it affects their credit. These financial woes so early on add to the difficult uphill climb into adulting
Federal student loans go into default after going unpaid for 270 days. Defaulting on a student loan can have serious consequences, such as:
- Tarnishing your credit report for up to seven years
- The government can legally garnish your wages, tax return, and federal benefits payments
- May hinder your ability to get approved for affordable credit
With the debt growing higher than many students can repay, what can credit heroes do to help?
How Your Credit Repair Business Can Help Fight Student Loan Debt Default
People who are in student loan default have options for getting back on track, such as forbearance, deferment, and income-driven repayment plans. But once someone’s credit has been damaged, the smudge remains on the report and they may still face financial struggles.
Credit Repair Cloud subject matter expert Corey Gray says student loan accounts are some of the hardest to remove from a credit report. That’s where your credit repair business, powered by credit repair software, can help. If you want to make fighting student loan debt a part of your credit repair business plan, you can:
- Help students remove a student loan from their credit report. It’s important for students to know that even if a loan is removed from their report, they are still obligated to pay the loan.
- Educate borrowers about their repayment options. Help students find the best repayment plan for their financial situation, and become a trusted financial advisor. Next time they need financial advice or credit repair help, who do you think they’ll come to?
- Help students dispute late-payments. With the help of our credit repair software, you can help people remove old accounts and dispute delinquent payment history that could be lowering their credit scores.
- Help people avoid student loan relief scams. There are many companies out there dubbing themselves as loan consolidation or student loan “debt relief” counselors. They charge upfront or monthly fees to help with loan payments, often paying very little or nothing towards the student’s actual debt. These scams can cause enormous long-term financial damage to the borrower.
- Point your credit repair clients in the direction of free loan rehabilitation services. You can be a resource for reliable, trusted government sources for loan rehabilitation. You can even help them get the process started.
Offering free credit and financial education is a great opportunity to build trust with your customer base. Empower them by teaching about their student loan repayment options, budgeting, and healthy credit habits. Corey Gray says a lot of companies who use Credit Repair Cloud software are using education as a strategy to teach healthy borrowing habits.
Although there are proposed changes on the rise that could reshape how student debt affects your credit report, the huge amounts owed don’t seem to be going anywhere anytime soon. Make battling the student loan debt crisis a part of your credit repair business plan and start helping more people today!