Missing even one student loan repayment can adversely affect your credit. The Student Loans Company will be collecting on your student loan each month, and if you are unable to make payments due to income reasons, the Student Loans Company should be contacted right away. The Student Loans Company will make arrangements to bring your account current before taking debt collection action.
It is possible to qualify for deferment if income falls below a certain amount, or it may be possible to arrange a reduced repayment schedule. The disadvantage to a reduced repayment schedule is that the remaining balance will still be due, and it'll be unpaid. These amounts will need to be repaid, and in that situation, the Student Loans Company will work with the student to ensure those payments are made. Missing a monthly repayment is also known as “arrears.”
Missing a single repayment results in a letter from the Student Loans Company alerting the borrower to the status of their account. Failure to acknowledge this letter will result in further attempts to contact the borrower, by mail or by telephone. If the repayment is 30 days late, a notation of this is made on the borrowers credit report. If the borrower is unable to be reached by the Student Loans Company, further action will be taken to recover outstanding funds, including contacting a debt collection agency.
If a debt collection agency is contacted, there will be notations added to the credit report of the borrower. These notations of debt collection will negatively affect the credit score of the borrower, and remain on the credit report for 3-7 years. Additionally, if legal action is taken to recover unfulfilled repayments, money can be deducted from the borrower’s earnings by the government-known as “attachment of earnings.”
Furthermore, the Student Loans Company can charge fees to the borrower to cover any costs incurred by their company in attempt to recover unpaid debt. These charges can include the costs of any and all legal action taken to enforce the credit agreement the borrower entered into. This also includes:
- a letter of overdue repayments on your loan account: £20
- dishonoured payment: £15
- debt collection by external agencies, tracing fees etc: at cost
- legal fees to enforce credit agreement: all costs and expenses incurred
To avoid these actions, the borrower should respond to any and all correspondence from the Student Loans Company, and contact them immediately if any financial hardship occurs.