Student loan balance

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Sarah Sacasa

• June 02, 2020 14:18

Hi! So I'm trying to rebuild my credit and I have my student loans in a repayment plan. They're being reported to the bureaus paying on time, but the overall balance keeps going up and it's negatively affecting my credit and any other options I have to keep building credit. Is this normal? Or am I going to have to wait 2 decades to apply for a car or apartment that requires a higher credit score?

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  CHRISTOPHER BATTISTA

  • June 03, 2020 20:50

  Primary question would be: why is your student loan balance increasing if you are making payments? this would indicate that you are paying less than the interest on the loan, or that you are still receiving money from the loan accruing more debt. both of which are indicators of a lack of credit worthyness.

  the easy answer to this, and any credit rebuilding question is: FIRST you must stop the increase of debt/ credit usage, second is you have to begin to reduce that usage percentage.  absolutely no move you make towards building credit will be effective if there is another move toward reducing your credit. Deal with this issue first, head on.

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  Sarah Sacasa

  • June 03, 2020 22:01

  I couldn't afford my payments so I applied for an IDR plan through the government. I have my recertification coming up (between July and October) so I won't ever pay off my loans, a portion is going to be forgiven in ~20 years. So I'm basically screwed for trying to keep them from defaulting?

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  CHRISTOPHER BATTISTA

  • June 04, 2020 15:51

  An account that is current, but growing is better than a defaulted account that is still growing. in this respect, you are doing the right thing. Interest rates on an IDR can be as high as 7%. That is a large APR across 20 years. My best advice is to get yourself a payment that covers at least the interest accrued, this will stop your debt from growing. Tell them you want a deal that stops the growth. As time goes on and your ability to pay more rises, start chipping away at the principal debt. 

  To answer your question Yes. IMO the last people you ever want involved in your loans (or life) is the Govt. "Basically Screwed" is the unfortunate definition of life with Student Loans. Real banks and credit unions,  wont refinance them, and the only help comes from a govt that couldn't manage a dollar to save their lives.  Just like yourself, someone (my parents) convinced me that starting out my life with a massive amount of debt was a great idea. I tried forebearance and interest only forgiveness programs. just kept kicking the can down the road. it is a large baggage you will carry for a very long time. do your best with it.

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  Sarah Sacasa

  • June 04, 2020 15:59

  I'll keep an eye on it for now then. Its a mix of sub and unsub so I am behind on paying off the interest that accrued during college.
  If I remember my credit monitoring reports, the majority of the balances went down with each payment, so it might look better in a year or 2

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