If you’ve ever desperately Googled, “do student loans go away after 7 years?” you’re not alone. Student loan debt can feel crushing, and that’s when it’s common to reach for anything that sounds like a solution, like the thought that your debt might disappear after a certain length of time.
Unfortunately, it’s a myth that your student loans go away after 7 years. If you don’t tackle your student loans, they’ll get worse rather than going away. The good news is there are methodical strategies that can help you get organized and in control of your student loan situation. Let’s dig in.
Student loan basics
Once you obtain a student loan, your lender can report the debt to the three major credit bureaus — Equifax, Transunion and Experian. This creates a record that you have the loan, and the status related to the loan — on-time student loan payments or missed payments — will likewise be reported. However, keep in mind that if you’re in a period of deferment, this will not be noted as a missed payment.
As soon as you obtain a student loan, you should also begin to monitor your credit so that you can correct any inaccurate reporting that might negatively impact your credit score. For example, if you are in a period of deferment or forbearance, not making monthly payments should not have a negative impact on your credit. When you do repay your loan, be sure the settled account is removed from your credit report.
Types of student loans
Not all student loans are created equal. Here’s a brief overview of student loans available to borrowers:
- Direct loan (subsidized): With these need-based loans, the federal government pays the interest while students are in school. The government also pays during a deferral period, or in forbearance.
- Direct loan (unsubsidized): These loans, available to undergraduate and graduate students, are not needs-based. Interest accrues beginning at dispersal.
- Direct PLUS loans: These loans are available to parents or graduate students but are not based on financial need.
- Direct consolidation loans: These loans enable borrowers to combine multiple loans into one, simplifying repayment.
- Private student loans: These terms and interest rates can vary greatly depending on your lender.
The 7-Year Myth About Student Loans
The “7-year myth” about student loans is a common misconception that they automatically disappear or are forgiven after seven years. It highlights a fundamental misunderstanding of student loans—here’s why.
Origin of the 7-Year Misconception
Some student loan borrowers are under the false assumption that their debts can be wiped clean in seven years. The 7-year student loan myth most likely stems from a misinterpretation of various aspects of credit reporting.
For instance, it’s true that there is a credit reporting time limit for negative information, like defaults. Late payments or defaults generally stay on your credit report for a maximum of seven years. This could mean that if you miss your credit card payments or payments for your auto loans and your lender reports this to the credit bureau, after seven years, it will no longer show up when you receive your credit report from one of the credit reporting agencies such as Transunion, Equifax or Experian.
However, student loans do not fall into the same category. No student loan forgiveness program automatically wipes out your debt after seven years. If your student loans enter into default, it likely won’t be long before you start receiving calls from a collection agency.
Consequences of Not Paying Student Loans for 7 Years
Student loans are not automatically forgiven or discharged. If you stop paying your student loans, you’ll now have defaulted student loans.
Federal student loans can remain on your credit report indefinitely until they’re paid off —- there is no statute of limitations. Defaulted student loans from private lenders may fall off your credit report after seven years. Keep in mind, you’ll still owe the money — and private lenders could pursue a judgment against you.
If you don’t respond to the lawsuit, a default judgment could be entered against you. If they are successful in their lawsuit, debt collectors could garnish your wages. They could also freeze your bank accounts, or place a lien on any property that you own. This will become a major red flag to future lenders that your student loan servicer sued you.
What Happens if I Default on My Student Loans?
Defaulting on your student loans will harm your credit in two ways. One, a late payment, sometimes referred to as a delinquent payment, will be reported to the credit bureaus. Then, if you don’t bring your payments current, your default will also be reported. Those are two separate negative events that will remain on your credit report.
Remember, if you do repay the loan in full, your default will be removed from your credit report within seven years of the last payment date — but it won’t fall off automatically if you do nothing.
The credit reporting process for defaulting can vary depending on whether your student loan was federal or private.
- Defaulted federal student loans:
- Reported as delinquent after 90 days, after which this negative event will appear on your credit report.
- Reported as defaulted within 270 days. If you’re concerned about whether your federal student loan is in default you can verify its status with your student loan servicer. You can also verify through the Department of Education or by obtaining a free copy of your credit report.
- Defaulted student loans from private lenders:
- Can be reported as late within 30 days of a missed payment. Policies vary by lender.
- Usually reported as defaulted within 120 days of a missed payment, but this window could be shorter depending on your lender’s policies.
Recovering from Student Loan Default
Defaulting on your student loans might sound scary, but it’s fixable. Yes, defaulting on your student loans will negatively impact your credit score. But, if you take steps to repair your credit and repay your loan balance, you can eventually recover. Here are some of your options if you’ve defaulted on your federal student loans and want to get back into good standing with your lender by tackling your student loan repayment:
- Consolidation loan: This is the process where you agree to repay a new loan using an income-driven repayment plan. Consolidation loans will not wipe away the default from your credit report.
- Federal student loan rehabilitation: This program gives you ten consecutive months to pay nine payments set at 15% of your discretionary income. This process can remove the default from your credit report while you repay your loan. However, any late or missed payments will remain.
Private student loans are a different story. It’s possible that your private student loan lender might have similar in-house programs. Or, you could potentially use an attorney to negotiate a settlement. You could possibly also refinance private student loans if you’re looking for repayment options to get out of student debt faster.
Can You Discharge Student Loans in Bankruptcy?
Discharging student loans in bankruptcy is possible, but it’s not easy and very rare— especially for federal student loans. To have your student loans discharged in bankruptcy, you would need to prove undue hardship in court.
There is typically a very high standard to proving this, which is why it could be prudent to work with a bankruptcy attorney to properly present your case, including that you have tried to repay the loans and the severe limitation in paying the loans back indefinitely.
Alternative Solutions to Student Loan Debt
If you’re stressed about your student loan debt do not fall for urban myths like the common misconception that your debt will disappear after seven years. Instead, find a professional you can trust to guide you through a plan that helps you gain control of your personal finances. A professional can help you know your rights regarding negotiating a settlement, finding a new repayment plan, or exploring bankruptcy.
Whether you’re considering student loan debt settlement or other matters, you can call today for free at (866) 890-7337 or fill out our short contact form. We’ll respond as soon as possible. All conversations are confidential, and we never share or sell your information.
