Do you have student loans? If you’re one of the many Americans who was forced to take out loans in order to afford the exorbitant price of college, you might want to consider paying back these loans in a timely and effective manner. Why? These student loans can actually affect your credit score if not handled correctly.
Student loans are just like any other loan: if you pay them in full and on time, you can bolster your credit score and procure credit history. But if you ignore them, or worse, default your loans, you could find yourself in a bit of trouble. Defaulting on your student loans not only hurts your credit score and credit history, but may also impede you from any further student loans (think graduate school) and even potential job opportunities. In fact, defaulting on your student loan will stay on your credit report for 7 years.
While (more often than not) there is a grace period after graduating college, it is imperative that you start paying back your student loans as soon as possible. Seek opportunities like a part-time job during the semesters, and always work a full time job in the summer. If the payments seem like more than you can handle, talk to your lender about options such as interest-only payments or extended repayment options.
All in all, paying your student loans is a delicate balance. Some say that paying off your loans to quickly can even hurt your credit score, given that lenders like to earn interest off of the loans they give out. On the flipside, paying off your student loans over a longer period of time may insinuate that you require a long time to pay off your debts. It is a sticky situation. But what you really need to know is that student loans are a great way to establish credit history and keep a solid credit score, if you don’t ignore or default on them.
