Student loans are a weight that many employees carry. Not only do they carry the weight of student loans, but also all of the other bills and responsibilities that are on their plate come along with being alive. This may have you asking yourself, “Do student loans disappear after 7 years? Is it really necessary that I pay them off?” Does Student Loan Debt Go Away After 7 Years?
Unfortunately, the answer isn’t so simple. Student loan debt does not go away after seven years, however after seven and a half years, unpaid, or defaulted student debt will fall off your credit report. When it falls off of your debt, it will no longer affect your credit score. So now you may be asking yourself, “Does that mean I don’t need to pay my student loans?” We will look at the pros and cons below and what happens after 7 years.
What If I Just Don’t Pay Them?
The temptation to just not pay your student loans after discovering that they “disappear” if you don’t pay them may be strong. Do I actually have to? If you forget about your loans; they dont forget about you. Unfortunately, student loans don’t ghost you. Your student loans will continue to accumulate along with interest and penalties, even if you don’t pay them. Lenders are not keen on letting their money just “go away” easily.
Consequences of Defaulted Loans
To think lenders just “forget” debt after seven years is foolish. There are extreme and even terrifying outcomes if your student loan debt is left unpaid. These included the seizure of wages, a major drop in your credit score, and even withdrawal of any professional license you hold.
Leaving student debt to pile up can haunt you for the rest of your life. It means you may not be allowed to purchase a home, car, or even rent an apartment. If you miss a payment, it is recorded on your credit report; this does not make you look good. This also means they can see the last date you submitted a payment when the loan was issued, the amount owed, and the lender’s name. This can haunt you for years and years. Defaulted student loans can even cause you trouble when searching for a job. It shows that you are an unreliable person.
Will Defaulted Loans Stay With Me Forever?
As we discussed earlier, student loans will fall off your credit after about 7 years. Loans go into default typically 270 days after payment has not been made. However, your Federal Family Education Loan Program, or FFEL, loan can still be transferred to the Department of Education, which means it will then reappear on your credit report. Bad news though for those of you who took out a Federal Perkins loan, it will follow you literally to your grave.
It is impossible to hide from them. Just like he says in the movie, Taken, “They will find you!” If you have any amount remaining on your account, it will not be taken off your credit report. The best way to remove it from your credit history is to consolidate it, or just pay it off.
What If I Have a Private Loan?
If you took out a private loan, then you may be in luck! Private loans are loans taken out from a lender other than the United States Department of Education. Since loans fall off of your credit report after seven years, that means the statute of limitations is up. The lender can still contact you to get you to pay your loan, but they can not take you to court. To be clear, you still owe this money, so if you ever make a payment, the clock will restart and you will have to wait another seven years.
So, What Do I Do then?
You pay off your debt. Part of taking out a loan is knowing you will have to pay it back. It is part of going to college and “becoming an adult.” Student loans have very few interest rates, traditionally between approximately three percent to about five percent, depending on the type of loan. This means that as you pay off your loan, the lender will charge you a set percentage monthly based on your principal balance, the amount you owe. So, if you don’t pay them, your loan will just get bigger and bigger.
How Do I Pay Off My Debt Quickly?
There are many different strategies to pay off your debt both effectively and efficiently. Some ways to lower your student loans quickly are as follows:
- Increase your monthly payment – this leads to decreasing your payoff time, which in turn, decreases your total interest paid.
- Don’t wait until you graduate – you can start paying your loans as soon as you take them out. Interest does not occur until post-graduation.
- Consider consolidating your loans – this can decrease your interest rate by putting all of your loans together.
- Apply for loan forgiveness – public services employees, non-profit employees, and teachers all have loan forgiveness programs.
- Ask your employer about repayment assistance – some companies offer help with paying back your loans in return for tax benefits
Conclusion
Your student loans will not disappear after seven years, they may fall off your credit report, but that does not mean you still don’t owe them money. The lenders still have a right to come after you to ensure you pay them back, along with the other consequences we discussed above. However, after twenty years, if you still have any outstanding balances on undergraduate loans, they are forgiven. If you went to graduate school, then you’ll have to wait another five years. Those are forgiven after 25 years.
Frequently Asked Questions
- How will my student loans affect my credit score?
If you don’t psy your loans, it can lead to a major dip in your credit score. Even late payments can cause your credit score to drop fifty to one hundred points.
- How long does it take for your loan to become delinquent?
It depends on the type of loan. A private loan will go into delinquency 120 days after no payment is made, and between 270 -360 days for Federal loans.
- Am I eligible for student loan forgiveness?
You can check your eligibility and requirements for student loan forgiveness at studentaid.gov.
