It’s been a hell of a summer for people with student loans. In June the Supreme Court blocked Biden’s student loan forgiveness program. Then in July, the Education Department announced it would automatically forgive student loans for more than 800,000 borrowers on income-driven repayment plans.
Now, we know that student debt will still have a chokehold over millions of Americans who previously had a glimmer of hope of seeing up to $20,000 in relief just a few months ago. For anyone benefiting from a pause on their payments since March 2020, your loan interest will resume accruing on September 1, with payments due in October.
But have you ever wondered what would happen if you made one late student loan payment? Not being late every month, or every few months, but just once? Perhaps you envision being scolded by some Sallie Mae rep, incurring devastating fees, or taking an immediate hit on your already-fragile credit score. And while these late payment scenarios might be exaggerated in your mind, there are nuggets of truth to each of them.
The difference between loan delinquency and default
Fortunately for student loan borrowers, lenders understand that people make mistakes, so the distinction between missing one payment and missing several payments are treated as separate issues by your lender.
Loan delinquency is when a loan becomes delinquent the day after the missed due date. The loan remains in delinquent status until the borrower takes an action such as payment, deferment, or forbearance.
Loan default comes after a certain period of non-payment. However, lenders and the federal government will allow for a grace period before the loan is officially considered to be in default status. For example, most federal student loans will not be moved into default status until after the person has not made a payment in 270 days. A default has more serious consequences compared to delinquency, and can lead to wage garnishment, lowered credit score, and collection agencies.
Consequences of one late payment
Since we’re only talking about a single missed payment, you would be considered delinquent on your loan. The possible consequences include:
Your credit report getting dinged: For federal student loans, delinquency is typically reported to the three major credit bureaus (TransUnion, Equifax, and Experian) after 90 days has passed. The length of time afforded before reporting to a credit bureau is different for private loans, but it can often be as little as 30 days. If you are not 30 days late, you typically won’t incur a bad mark on your credit report. Otherwise, you could get dinged up to 100 points on your credit score, which will make future loans more expensive.
Late fees: There is usually a grace period on delinquent loans before a late fee is assessed, though it varies by lender. Sallie Mae charges a late payment fee of 5% of the past due amount up to $25, and a returned check fee of up to $20. Not all lenders are alike, however, so make sure you call your own lender and understand the consequences of a delinquent private student loan versus a delinquent federal student loan.
How to avoid late penalties
One of the easiest ways to prevent a missed payment is by setting up automatic bill payment on your student loans through your bank (which might sound obvious, but many people don’t). Of course, make sure that you have enough money on the withdraw date to cover the debit to avoid incurring overdraft fees.
Otherwise, if the problem is simply not being able to pay your bills temporarily, contact your lender and explain your situation. If you have a good track record of making consistent payments, your lender will likely give you a break and cancel your late fee, or at least hold off on reporting your delinquency to the credit bureaus.
And if you’re simply not sure if you have the finances to cover your student loans long-term, the advice is the same: Reach out to your lender and see if you can work something out. A lender will have some forbearance options that are available only if you haven’t defaulted on your loans already (for more information, read this Lifehacker post).
Here’s our guide to getting your debt repayment plan in order and exploring other loan forgiveness options that may still be on the table. And on the flip side, here’s what happens if you don’t miss just one payment but choose to say, well, fuck it all.
This post was originally published in January 2021, and was updated on Aug. 7, 2023 to include updated context and current information about late student loan payments.