If you thought that a student loan was somehow separate from your credit score, think again. Earlier this year, Yahoo! schooled college students and their families on how student loans can affect credit scores in good and not-so-good ways.
Although this is up for debate, you may have heard that some financial experts assert the idea student loan debt is “good debt” but the fact remains that it is still debt. The best thing you can do is to pay your student loans in a timely fashion. The credit bureaus are watching to see that you pay the lender back on time, same as they do with car loans, home loans, or credit cards.
The worst thing you can do with a student loan is to let it go into default. If you didn’t know, it is possible to defer a student loan—which means that you request that the requirement to make payments be suspended for a certain period of time. You have to make the deferment request yourself, however. Deferment may not be an option if you default on the loan, so you shouldn’t wait until you are at a breaking point to defer your student loan. When you realize you don’t have enough to continue payments, request a deferment. The interest will still accumulate and you will still need to pay the loan back, but deferment won’t hurt your credit score like defaulting on the loan will.
As Yahoo! observes, “After spending four years stressing out about your GPA, your credit score shouldn’t become your newest three-digit obsession…” Limiting the student loan debt you have and on-time payments can alleviate post-graduation stress. For some students, repaying a student loan is an important step towards building a good credit history. If you have taken on little debt in your name, making timely payments your student loans will demonstrate that you can handle credit so lenders will be more likely to consider you for other loans in the future.