By coinnews 
00:00 Speaker A
All week long on Wealth, we’re talking student loans, and today we’re narrowing in on interest and repayment. A report from the New York Fed estimated that as many as 9 million Americans could see their credit scores lower due to overdue student loan payments. Joining me now in studio with more on how borrowers can avoid joining that group is Peter Grandville, the Century Foundation fellow. So Peter, obviously, there’s been a change in the past five years. This is now changing again. So how do we get here to this situation?
00:39 Peter Grandville
Yeah. So federal student loan borrowers had about three and a half years in which they did not need to make federal student loan payments. On top of that, there was one more year in which the consequences of not taking, not making your monthly bills were not as severe. That has now changed. It’s now been enough time that people are really facing these risks of default and potentially, you know, on the way delinquency, and your credit score going down. And that’s very serious.
01:19 Speaker A
Yeah, let’s talk about that credit score piece of it. So how and why does the credit score get hit? How long does it take for you to not pay your loan for it to affect it? How does that all work?
01:34 Peter Grandville
Yeah. So your credit score is a function of your history of making your bills that are due to you. Um so, if you are not making your monthly student loan payment for 90 days or more, that’s when that information is going to go to these credit agencies. That’s when your potentially your credit score is going to go down as a result. That’s going to make it harder to borrow more, more money in the future. So auto loans, mortgages, getting those things are complicated enough. So don’t make it more complicated by missing a federal student loan payment, which you could potentially make.
02:25 Speaker A
Um and so if you’re a new grad, um who are just finishing their education, how long do they have uh before they have to get on it and start repaying?
02:41 Peter Grandville
Yeah. So the idea is you’re taking out a student loan to get a good job which will help you, you know, have a good livelihood, have a good life and also pay off your student loans. So these loan programs have grace periods in which it’s about six months very often where you’re getting that that good job. Um a lot of people, especially right now, are finding that can be kind of tough. And so if you are at the end of that grace period and realizing, oh, actually I’m not quite as ready as I thought to make that monthly payment, you do have options. So you can talk to your servicer about a deferment, especially if you have things like medical expenses that are very high right now, but also you can look for income driven repayment plans. The uh the website of the Office of Federal Student Aid has a calculator where you can put in your own personal information and find out what plan is going to be best for you that can lower your monthly payment based on your income and family size.
03:49 Speaker A
And how do you find out what your loan rate is? And can you also renegotiate that rate in some cases?
04:00 Peter Grandville
Yes. So you uh want to find out who your servicer is. They have all the information about that. The way to find out who your servicer is is through the Office of Federal Student Aid website again. Find your FSA ID from when you filled out the FAFSA and got this whole process started, and then log into that website. Um that’s a lot of steps. This can sound confusing. I remember I was 23 years old, fresh out of grad school. Um I was getting emails from what turned out to be my servicer, and I didn’t know it was my servicer. So I sort of ignored a couple emails, and only once I clicked on it did I realize, oh, they have my loan, I owe them money. So it’s a really important thing just to get those details. It’s okay if this is overwhelming. It’s okay to be naive just like I was when I started out. But we really have the threat of delinquency and default happening right now for a lot of borrowers. And so it’s a really good time to get that key information from your servicer.
05:13 Speaker A
And just quickly, what’s the best way you would get or what’s this good source of information on all of this stuff?
05:21 Peter Grandville
Yes. So right now the Office of Federal Student Aid, they’re the ones in the Department of Education who oversee this. There’s a lot of turbulence at the federal level, and so you want to make sure that you are leveraging all the resources you can save documents, and also make sure that you’re not going to be scammed. There’s going to be a lot of changes at the federal level, so make sure you’re not victim to, you know, identity theft or people trying to convince you that you owe them money that you actually don’t. Be very vigilant about getting all the information you need.
06:00 Speaker A
That is a great point, Peter. Thank you so much. Appreciate it.
06:05 Peter Grandville
Thank you.