Biden restarts late fees on student loans

Starting in October, borrowers who miss their student loan payments or make a payment significantly after their due date will start incurring late fees again. While these fees may be minimal in certain cases — say, $5 — they have to be repaid, and they add to the total cost of monthly payments. Falling behind for multiple months can lead to compounding late fees, further driving up the cost of curing missed payments and avoiding default.

During the on-ramp period, missed federal student loan payments were not supposed to be reported negatively to the national credit bureaus or otherwise adversely impact a borrower’s credit report. Even borrowers who were already in default when the on-ramp period began should not have experienced negative credit reporting under the related Fresh Start program, according to the Department of Education. Fresh Start is similar to the on-ramp in protecting borrowers from the consequences of default, while also giving them a pathway back into good standing and regular repayment. Like the on-ramp, Fresh Start also ends on September 30.

But with the on-ramp ending, missed payments will now be reported to national credit agencies again. Even one missed payment can severely damage someone’s credit report and reduce their credit score dramatically. While some loan loan servicers may not report missed payments until the borrower is 90 days past due, missed or delinquent payments can technically be reported after just 30 days.