If you have student loans, by now you surely know the good news: Most federal loans are automatically in forbearance until the fall. That means borrowers don’t have to pay, but student loan servicers still mark loans as paid on time. It’s a six-month free pass.
Except there’s one small issue: getting the correct information about the payment suspension period to credit bureaus. Because if we’ve learned anything this spring, it’s that implementing mass adjustments because of the coronavirus takes time and doesn’t always go smoothly.
That’s why student loan borrowers flocked to Reddit over the weekend after noticing that their credit scores had gone down by as many as 50 points. The only reason most commenters could determine is that their federal student loans had been updated on their credit report to indicate the loans were deferred or in forbearance.
The CARES Act makes it clear that eligible federal loans should be reported as current and in repayment. So what gives?
Luckily, we now know there isn’t a sinister plot afoot to ruin your credit during the pandemic. It’s a programming issue. The word comes from Betsy Mayotte, the founder of nonprofit The Institute for Student Loan Advisors (TISLA).
According to Mayotte, who’s active on Reddit, this is the first time student loan servicers’ systems have needed to indicate a large-scale payment waiver. “Up until now, there were no forbearances or deferments that should be reported as anything other than a forbearance or deferment,” she wrote in r/studentloans. “The servicing systems had to be reprogrammed to report these waivers as in repayment and receiving payments even though they are actually in a forbearance.”
On top of that, federal student loan servicers send reports to credit bureaus on the 10th of each month; while they were able to indicate the waivers on borrowers’ reports, they weren’t able to fix the reporting part of the process to show that all the accounts are in good standing.
If your score has fluctuated, Mayotte expects it will take a few weeks for your credit report to accurately reflect the waiver program and your score to level out. For now, you shouldn’t need to dispute the issue with each credit bureau. But keep a close watch on your reports for the next several weeks in case the issue persists.
Don’t forget that you can get free weekly access to your credit report from each credit bureau now through April 2021 by visiting annualcreditreport.com. While you can check your credit through a variety of other free sources, the chance to check your report with each bureau directly as often as weekly (rather than once per year per bureau) can be a huge help to keep track of your finances right now.