The Credit Scores of Student Loan Holders Dropped Due to Nelnet Missed Payments. A Comprehensive Analysis
Many student loan borrowers are reporting significant drops in their credit scores, with some experiencing a **credit score decline** of up to 200 points. The borrowers say they didn’t know that payments were missed until third-party agencies notified them. The situation raises serious concerns about the **financial implications of student loans** and the effectiveness of loan servicer communication, particularly among those with **federal student loans**.
A core problem: the breakdown of communication and its impact on credit scores
A number of borrowers claim that they did not receive any communication regarding the resumed loan repayments, or notices for past due payments, from Nelnet. This lack of communication has led to a steep **drop in credit score**, impacting their ability to secure favorable loan terms in the future.
Understand Credit Scores
Your credit history is reflected in your score. It can range anywhere from 300 up to 850. Your score is influenced by:
* **Bill Payment History:** Consistent, on-time payments are crucial.
* **Length of Credit History:** A longer history generally improves your score.
* **Current Unpaid Debt:** High debt levels can negatively impact your score.
* **Adverse Events:** Accounts sent to collection, foreclosure, or bankruptcy severely damage your score.
A score of over 670 will be considered excellent, and a score higher than 800 good. Credit cards, auto loans, mortgages and renting apartments are all dependent on a good score. Low credit scores can lead to loan denials and unfavorable conditions, like high interest rates.
# The end of the “On-Ramp” Period and Delinquency Risques
The COVID-19 pandemic halted student loan payments. Biden’s administration created a 12-month “on-ramp” period when repayments resumed to avoid any consequences for missed payments. This period expired on September 30th, 2024. Borrowers who did not make timely payments now face delinquency.
After three missed months, loan servicers report the delinquency to credit bureaus. This has a significant impact on credit scores. Loans become defaulted after nine consecutive months. **Student loan deferment** or forbearance can temporarily pause payments, but interest continues to accrue.
As loan servicers such as Nelnet notify credit bureaus of delinquent borrowers, many borrowers are feeling the consequences.
## Borrowers share their stories of the real-life impacts
A number of borrowers spoke out about their experience, emphasizing the negative impact these score declines have on them.
Henry, a borrower who had a great debt-to-income and made on-time payment history, said that his score was destroyed. He understands the importance of keeping in touch, but is disappointed that he did not receive notifications when his payments fell 30 or 60 days behind schedule.
Scarborough also expressed concerns over Nelnet’s communications, saying she received no voicemails or emails regarding repayments. She expressed her frustration at the “mismanagement” of Nelnet and said she had difficulty in navigating Nelnet processes.
Jernigan stated that “no notice or communication” was received from Nelnet, and the contact details were incorrect. Jernigan stated that payments were recommended to help build their credit.
Many borrowers are left feeling hopeless about their future financial security.
Borrowers should take note of these expert insights and actions
**Attorney Michael Lux, founder of The Student Loan Sherpa**, cautioned against using the “on-ramp” period to delay payments. He suggests setting up automatic payment to avoid unwanted consequences and ensure timely payments. It is important to explore income-based repayment plans for people who are struggling with payments.
How to Rebuild Credit and Get Assistance
Borrowers who have experienced a **drop in credit score** need to take proactive steps to rebuild their credit:
* **Make Timely Payments:** Ensure all future payments are made on time.
* **Reduce Credit Utilization:** Avoid maxing out credit cards.
* **Check Credit Reports for Errors:** Dispute any inaccuracies with credit bureaus.
* **Apply for Credit Wisely :** Only open credit that is needed.
Additional Resources
* **Federal Student Aid Website:** Provides information on loan servicers and repayment options.
* **Consumer Financial Protection Bureau (CFPB):** Offers guidance on building a strong credit score.
## Addressing the Accountability of Loan Servicers
Recent reports on credit scores dropping highlight the need to improve communication and accountability of loan servicers. Clear and timely information will help borrowers avoid costly financial mistakes as they negotiate the complexity of student loans repayment.