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What Happens if You Miss a Student Loan Payment in Canada?

Student loans can be from the federal government or private firms and are expected to be repaid on time as agreed upon when signing the terms of the loan.

Unfortunately, sometimes after a well-designed student loan repayment plan by the borrower, life happens, and you find out that you are late on repayment or have to skip your loan repayment.

When this happens, your loan becomes delinquent, but there is no cause for panick. If you act swiftly, you can prevent your mistake from tarnishing your credit score or further jeopardizing your financial future. Being late on your loan repayment does not mean that your loan servicer will soon be knocking at your door.

The first thing to do as soon as you realize that you are late on your loan repayment is to quickly call your loan servicer or lender and explain your situation. Most loan lenders might be considerate and waive any fees. They could also allow you to make your loan payment over the phone so it can be processed immediately.

Though your payment goes into delinquent when you miss your student loan repayment by even one day,  most lenders won’t take any actions until your payment is at least two weeks overdue.

Therefore delaying or skipping one student loan repayment won’t be much of a setback except you forgo it for too long. These are some of the possible outcome you can expect when you delay or skip your student loan repayment.

Late Fee

Different lenders or loan servicers have different policies for when your student loan repayment fee comes in late. Your loan servicer may charge a late student loan repayment fee of up to 6% of the missed payment.

It is always a good idea to communicate with your loan servicer ahead of time if you have any difficulties with your student loan repayment. If it is a first-time offence, speaking to someone from your loan servicer might be favourable to you by getting your student loan repayment fee waived.

Lower Credit Score

If your student loan repayment delays from 45 days to 90 days, your student loan lender or loan servicer will have it reported to the major credit bureau. This can cause a drastic decline in your credit score that will take several months of early loan repayment to boost it back up.

When this happens, it makes it difficult for you to secure any student loans and credit cards in the future. A lower or bad credit score due to loan repayment delays can also affect your chances of getting a good job afterward.

Loan Default

When you miss your student loan repayment for 270 days, your loan goes into default. This further damages your student loan and incurs more severe penalties such as the seizure of your tax refunds or other government benefits, wage garnishments or your loan lender taking you to court. It is advisable to avoid your loan entering default at all costs.

As bad as it sounds, late student loan repayment can stick to your credit report for up to seven years. This will not only affect your ability to get any further loan, credit card or mortgage but will also affect the interest rate you get on your student loan.

Can Late Student Loan Repayment Be Removed From The Credit Report?

Yes, there are a few ways that late student loans can be removed from the credit reports. Below are ways to go about eliminating lates student loan repayment from your credit report.

Goodwill Adjustment Request

If you had a good payment record with your loan provider and have a good relationship with them, writing a letter of goodwill adjustment is a step to take in getting your loan provider informed about your situation.

Explain your situation and the reason your student loan repayment is late. Go ahead to ask that they forgive the late payment and adjust your credit report accordingly. With this, if your loan provider is lenient, it is a sure and easy way for late payment removed from your credit record.

Sign Up For Automatic Payment

Approaching your loan provider to negotiate the removal of late payment from credit records by signing up for automatic payment is also a widely accepted method.

This plays out well to both parties as you don’t have to worry about late payment and your loan provider, on the other hand, has a guarantee that payments will be made on time.

File For Inaccuracy Dispute

This option works when you find any inaccuracies or glitches with the dates or amounts on your late payment record.

You can file in for errors and dispute the late payment. Sometimes loan providers face difficulties with the verification of borrower’s exact account details. If your dispute is valid, the negative entry will be removed from your record.

There are still other options, especially from federal student lenders.

The Student’s Late Loan Payment Forgiveness Program

This program works mainly for federal loan lenders. You can call your loan provider to inquire about their late payment forgiveness program.

Typically, they will clear your past late payment from your record if you can make nine payments on time. This is a process that takes lots of effort and discipline, but in the end, it is worth it.

Being late with your student loan payment, especially when you are late for 90 days, is disastrous to your credit score. Just as mentioned above, the late payment stays on your credit report for seven years.

Being late with payment of loan gotten from federal lenders could stick on your credit indefinitely if you don’t work out a reasonable repayment or student late payment forgiveness plan.

If you are late on your loan payment, there is still hope for you. Reach out to your loan provider, ask the operator what your options are, and let them set you up with an option that suits you from the programs they offer.

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