Student Loan Deferment and Forbearance is it Bad for Credit Scores?

Question:

Dear Van Horn Law Group,

I have student debt of about $50,000 from getting my BSN from one of the top ten nursing schools in the country – and that’s with a partial scholarship and grants. I passed my NCLEX and was hired, but it’s been hard to make ends meet with a loan payment on top of everything else. It’s an income-based repayment plan, but between commuting costs, rent, a car payment, food, utilities and everything else, it can be a real stretch to meet that payment. I’ve paid late a couple of times, but am in good standing.

A friend of mine from college joined the Navy Nursing Corps right out of school and had only great things to say about it. I’ve talked to a recruiter, and think that this could be the thing for me. I can serve my country, save some money, and put my loans into deferment while I am on active duty.

The problem is my loan servicer told me

1. I might not be eligible for a military deferment and
2. that if I put my loans into deferment, that it will hurt my credit score and make it hard to get an apartment, or a credit card, or anything else that requires a credit check.

I know that loan servicers are sometimes less that truthful. Is this true or are they making “materially misleading representations” to keep that payment coming in?

Pam

Answer:

Dear Pam,

That was a whopper for sure. I know that loan servicers said that they couldn’t be expected to act in the borrower’s best interests, but… wow. Especially when it’s right on their website. I shouldn’t be harsh, one agent can’t be an example of a whole company, but that’s either pretty blatant telling of untruths or a serious gap in training. Now, as to your second concern, the effect on your credit is… nothing.

No effect.

Zip.

Zero.

Student Loan deferments and forbearance are noted on your credit report, yes. There is no impact on your credit score. Your report will show if you have made late payments are delinquent, or in default. Getting a student loan deferment will not change that, but your score may improve if you are not making late payments. Also, depending on your type of loan, the government may pay for your interest while you are in deferment.

You sound as if you have a good plan for your future. There are some other financial benefits you should know about that come with military service, such as low-interest loans, a ten percent return on savings, and other things that will help you to plan a secure financial future. If you have any questions, we do offer free consultations in our Fort Lauderdale and West Palm Beach offices, and we are open seven days a week. Give us a call if you have any questions and make an appointment.

Thank you for choosing to serve your country and the best of luck in your career.

Chad Van horn