Current and delinquent student loans appear on borrowers’ credit reports. How long a delinquent student loan will appear on a credit report depends on whether the loan is private or federal. Federal law controls how long a derogatory, the term used to describe a negative mark, can appear on a credit report. Let us start by reviewing the rules for credit reports.
Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.
Some debts have a reporting period longer than 7 years, including:
The FCRA 7-year rule is separate from state statutes of limitations for debt issues. Learn the lifespan of a judgment in your state at the Bills.com Statute of Limitations Laws by State page.
The start of the 7-year clock begins at the date of first delinquency, or if no payments are made, when the first payment was due. Review your credit report carefully to make certain the dates of first delinquency are reported correctly. Unscrupulous collection agents reset the date of first delinquency to stretch out how long a derogatory account appears on consumer’s credit report. This is illegal under the FCRA.
Just because a debt does not appear on a credit report does not mean the statute of limitations for the debt has passed. The opposite is also true: The passing of a state statute of limitations on a debt does not mean the debt may not appear on a credit report. The federal FCRA and state statutes of limitations are separate and independent of each other.
Whether a debt appears on a credit report does not establish legal liability for the debt. The opposite is also true: You may have legal liability for a debt not reported to the credit reporting agencies. Credit reports are not legal records of every debt a person owes.
Private student loans are treated no differently from other private debt. As mentioned above, the 7½-year rule applies to private student loan debt.
If you have a derogatory relating to a student loan, review your credit reports to verify accuracy of the date of last payment and date of default. Do this for reports generated by three reports credit reporting agencies. You can obtain a free copy of your credit report from each credit bureau once every 12 months by visiting AnnualCreditReport.com. You can also purchase a copy of your credit report from the credit reporting agencies if you would like to review your report more often.
A private student loan falling off a credit report will not cancel the debt or make it uncollectable. Also, the date a debt falls off a credit report has no relationship to a state’s statute of limitations. See the Bills.com resource Private Student Loan Settlement to learn strategies for resolving private student loans.
Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent. For federal student loans, the Dept. of Education will continue its collection efforts until the loan is paid. If your student loan is federal, consider rehabilitating your loan, which should allow you to resume payments on the loan and have the default removed from your credit report. The Dept. of Education may also offer other options to help you repay your loan at a rate you can afford. Contact the Dept. of Education’s collections office to discuss the repayment options available to you.
If you fail to resolve your student loan obligations, the Dept. of Education may garnish your wages, levy your bank or credit union accounts, or place a lien on your property. If you cannot afford to make payments, or do not wish to do so, consult with an attorney in your state to discuss the risks associated with your unpaid student loan.