Credit Report Articles

Manage Student Loans Wisely To Safeguard Your Credit Report

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Attending college has become a widely popular path over the last fifty years. At the same time costs of tuition and room and board have sky-rocketed. So it’s no surprise that today a majority of young adults walk away from college owing thousands of dollars in student loans.

Student borrowing has increased astronomically in recent years. According to the College Board’s most recent statistics, reliance on federal loans increased 107 percent from 1997 to 2007; and during the same period private loans ballooned 989 percent. More recent government reports show that for the first time in history, student loan debt has surpassed that of credit cards. These borrowing trends highlight the need for young adults to be more cognizant of their credit habits. Particularly, how managing their student loans impacts credit reports and scores, and in turn dictates future access to finances.

Federal student loans carry a fixed-interest rate and can be either subsidized or unsubsidized. What’s the difference? The Department of Education covers the interest that accrues while the individual is in school with a subsidized student loan, but young adults are responsible for paying the interest on unsubsidized financing. Subsidized financing is available based on financial need, while unsubsidized funding is open to all students.

Federal student loans offer a number of different repayment plans, including standard ten-year repayment programs or extended plans. Choose your program wisely to avoid falling behind on payments and damaging your credit report and credit score. If you are unable to abide by the repayment agreement you have made with your lender, call them – they may have deferment or income-based solutions for you.

Private loans, in contrast, are provided by a traditional lender or bank and tend to carry higher fixed or variable interest rates. Additionally, repayment options for these loans are less flexible.

Because student loans have a long-term impact on your credit score, examine loan options thoroughly. Don’t make a commitment you can’t live up to. Maintaining strong credit means making your payments on time every month. Like other types of financing, student loans appear on a person’s credit report and will impact future loan eligibility, interest rate assignments, job prospects and tenancy.