Have federal student loans? Check your credit report ASAP for errors

Posted: 14 May 2020 1:51 pm
News

Stressed couple holding their head in pain while working on their monthly finances at home.

One borrower saw her score plummet over 50 points due to misreporting — here’s what you can do to help avoid a similar fate.

To help millions of Americans hit hard financially by the coronavirus pandemic, the US Department of Education suspended repayments on federal student loans until October 1, 2020.

By law, federal student loan servicers can’t report nonpayment to the credit bureaus during this time. In fact, servicers are supposed to treat paused loan repayments as on-time repayments. So not only should borrowers’ credit scores not go down, but they have the potential to increase.

But this isn’t happening.

Two federal student loan borrowers have seen drops to their credit scores over the last few weeks — with one woman’s plummeting over 50 points — reports Channel 2 Action News. When they looked into these drops, they discovered their student loan servicer, Great Lakes, reported their federal student loan accounts as delinquent due to nonpayment.

What you can do in the meantime

First things first, request a copy of your credit report from each of the major credit bureaus: Equifax, TransUnion and Experian. All three are now offering free weekly online credit reports through April 2021 that you can request on their website.

If you notice any missed payments reported on your federal student loans between March 27, 2020 and September 30, 2020, file a dispute with the credit reporting agency.

Student loan expert Anna Serio also recommends checking in with your servicer.

“In addition to checking your credit, log in to your account on your servicer’s website to make sure everything checks out,” said Serio.

“Reach out if you notice that anything looks off. Many servicer’s customer service lines are backed up, so if you need to get in touch, consider emailing or live chatting with a representative if it’s an option.”

Make sure to document any contact you have with the credit bureau or your servicer, making note of who you talked to and when you submitted proof.

It can take months to get the errors corrected, so check your reports each week and continue to follow up to ensure errors gets fixed.

An ongoing issue

Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, suspended federal student loan repayments were meant to help borrowers free up cash and avoid negative effects on their credit report during this tumultuous time.

Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, blames the misreporting by Great Lakes on the fast turnaround servicers were required to update their systems in after the CARES Act passed. And warns that Great Lakes likely isn’t the only servicer with this problem.

“They all have credit reporting deadlines, and some of them weren’t able to get all that programming done by the deadline,” said Mayotte.

A representative for the US Department of Education says the misreporting is due to a coding issue, and the department is working to get it fixed by the end of the month.

And this isn’t the only issue plaguing student loan borrowers. In a court filing released by the US Department of Education on Monday, it admits it’s still garnishing wages of more than 50,000 borrowers — almost two months after it was ordered to stop under the CARES Act.

Home health aide Elizabeth Barber is leading a class-action lawsuit against the agency in an effort to get the government to actually stop garnishments and issue immediate refunds to any borrowers whose wages were docked since March 13, 2020.

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