Student Loans and Credit Reports

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1 Student Loans and Credit Reports

2 We Will Discuss The role of credit in personal finance Review of credit terms and factors Impact of student loans on reports and scores Next steps you can take to encourage and educate your borrowers

3 The Role of Credit in Personal Finance

4 Credit is an Obligation Help students understand their obligations and options as a borrower Credit is a contract that allows for purchases and services now but pay later with interest

5 Good Credit Behavior is Rewarded Good credit enables students to: Qualify for Grad PLUS, private, or other consumer loans Receive lower interest rates and fees Receive lower insurance rates Buy a home or rent an apartment Secure employment Avoid cash deposit requirements

6 Review of Credit Terms and Factors

7 Credit Reporting Agencies Collect and store the credit records of millions of individuals Provide credit reports to paid subscribers and consumers Work together to develop, maintain, and enhance an industry-standard reporting format

8 Major Credit Reporting Agencies 745 Anton Blvd. Costa Mesa, CA (888) P.O. Box Atlanta, GA (800) P.O. Box 1000 Chester, PA (800)

9 Federal Student Loan Reporting Requirements Loan holder must Report information on each student loan it makes to all credit bureaus within 90 days of each disbursement ED strongly encourages holders to wait until the borrower is at least 60 days delinquent

10 Credit Report Credit report summarizes an individual s financial history Used by creditor to predict risk Applicant is able to handle additional credit Applicant is responsible with personal finances

11 What the Credit Report Says About a Borrower Which types of credit they use Revolving Retail store cards Credit cards Installment Installment Credit Auto loans Home loans Student loans Whether they pay their bills on time How much they owe How much credit they have available Mortgages

12 Information Found on the Credit Report Personal Information Name, address, birth date, and employer Account Information Date opened, credit limit, balance, monthly payment Public Record Information Bankruptcies, judgments, wages garnishments

13 Information Found on the Credit Report Inquiries Your own, from lenders, from employers landlords, etc. Statements of Dispute Date opened, credit limit, balance, monthly payment

14 How Long Negative Information Remain on a Credit Report Defaulted Loans 7 years from the date the loan was 30 days delinquent Bankruptcies 7 years for complete Chapter 13 bankruptcies and 10 years for Chapter 7 bankruptcies Late Payments 7 years

15 How Long Negative Information Remain on a Credit Report Collections Generally, about 7 years, depending on the age of the debt being collected Public Records Generally, about 7 years Foreclosures 7 years

16 In-School Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Open in good standing Account Number: Date Opened: 09/2010 Reported Since: 09/2010 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: Monthly Payment: $0 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: Recent Balance: N/A Recent Payment: $0

17 In-Repayment Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Open account in good standing Account Number: Date Opened: 09/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: 120 Months Monthly Payment: $253 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: Recent Balance: $20,433 Recent Payment: $253

18 Delinquent Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Account past due 60 days Account Number: Date Opened: 09/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: 120 Months Monthly Payment: $253 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: Recent Balance: $20,344 Recent Payment: $0

19 Deferred Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Open/Deferred until 5/2014 Account Number: Date Opened: 06/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education loan Terms: N/A Monthly Payment: $0 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: N/A Recent Balance: $20,445 Recent Payment: $0

20 Consolidation Loan Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Closed/Transferred Account Number: Date Opened: 06/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: N/A Monthly Payment: $0 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: N/A Recent Balance: $0 Recent Payment: N/A

21 Paid in Full Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Closed/paid/zero balance Account Number: Date Opened: 06/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: N/A Monthly Payment: $0 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: N/A Recent Balance: $0 Recent Payment: $253

22 Defaulted Status Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Account Number: Status: Claim filed with federal government Date Opened: 06/2008 Reported Since: 09/2008 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education loan Terms: N/A Monthly Payment: $0 Responsibility: Individual Credit Limit/Original Amount: $22,000 High Balance: N/A Recent Balance: $0 Recent Payment: $0

23 Rehabilitated Student Loans Loan(s) will no longer be considered to be in a default status The default status reported by loan holder will be deleted from credit report History of delinquencies will remain on credit report

24 Rehabilitated Student Loans Great Lakes/U.S. Department of ED Address: 2401 International Ln Madison, WI xxx-xxxx Address Identification Number: Status: Open/Account in good standing Account Number: Date Opened: 09/2012 Reported Since: 09/2012 Date of Status: 11/2013 Last Reported: 03/2014 Type: Education Loan Terms: 300 Months Monthly Payment: $175 Responsibility: Individual Credit Limit/Original Amount: $27,500 High Balance: Recent Balance: $25,234 Recent Payment: $175

25 Credit Score A number that predicts the likelihood of repaying debts on time Based on a mathematical equation that evaluates many types of information in the credit report Each credit bureau offers credit scores for purchase FICO is most commonly used model Scores range from 300 to 850

26 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Payment History Number of days delinquent Time since last delinquency Number of delinquent accounts Source: myfico.com

27 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Student Loan Impact Late payments could drop the score by as much as points Source: myfico.com

28 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Amounts Owed Total amount owed compared to original loan amount on installment accounts Source: myfico.com

29 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Student Loan Impact Student loan amounts are included in overall debt balances Source: myfico.com

30 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Length of Your Credit History The amount of time since credit accounts have been opened Source: myfico.com

31 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Student Loan Impact Staying in good standing will improve their score over time Source: myfico.com

32 Factors That Make up a Credit Score 10% 10% 15% 30% 35% New Credit The number and time since recent inquiries for new credit Source: myfico.com

33 Factors That Make up a Credit Score 10% 15% Source: myfico.com 10% 30% 35% Student Loan Impact No impact from Federal Stafford application Parent/Grad PLUS application will count as a hard inquiry and may lower the score slightly

34 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Types of Credit Used Looks at the mix of credit types in your credit file Source: myfico.com

35 Factors That Make up a Credit Score 10% 10% 15% 30% 35% Student Loan Impact Student loans are a form of installment credit Source: myfico.com

36 Impact of Student Loans on Credit Reports and Scores

37 Impact During In-School Period Loan Application Stafford loans (no credit review required) PLUS loans (credit review required, will show as an inquiry) Credit Report Credit Score Private loans (credit review required, will show as an inquiry)

38 Impact During In-School Period Disbursement Credit Report Credit Score Federal Student loans (reported within 90 days) Private Student Loans (varies by lender)

39 Impact During Post-Enrollment Period Repayment Credit Report Credit Score On-time payments Delinquent payments Deferred/In-Forbearance

40 Next Steps: Educate and Encourage

41 Encourage Student Loan Borrowers Understand their obligations as a borrower Utilize NSLDS to keep track of the federal student loans

42 Encourage Student Loan Borrowers Become familiar with the information in their credit reports Consumers are entitled to one free credit report per credit bureau in a 12-month period Official site annualcreditreport.com

43 Encourage Student Loan Borrowers Choose an affordable payment plan Make payments on time Set up auto-debit

44 Encourage Student Loan Borrowers Contact the servicer immediately Difficulties making a payment Change payment due date Change payment plans Catch up on missed payments if they become delinquent

45 Resources You Can Use

46 Resources Cashcourse.org provides free, customizable financial education resources for colleges Can be added to your school s website Includes tools such as Budget Wizard and workshop materials Provided by the National Endowment for Financial Education (NEFE )

47 Resources Practicalmoneyskills.com Credit card and debt; saving and spending; calculators; videos and more

48 Resources Annualcreditreport.com or (877) Myfico.com Bankrate.com Optoutprescreen.com

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