Student Loans Officers Make Credit Reports Due to Cares Law Forbearance
This story has been updated.
Robert P., a student borrower from Queens, New York, was surprised to find that credit score dropped by 100 points after his federal decision student loans served by Great Lakes higher education were automatically forbidden. This happened as a result of adoption of the CARES law. Another borrower named Ashley Higgins has experienced a decline in their credit rating during the same period and told a local news affiliate what had happened. Other borrowers (who wished to remain anonymous) also reported similar credit score results.
Student loans from these borrowers are in good standing and no payment is due. What’s going on? Why are their credit scores going down?
Context of the CARES law
The CARES Act – a federal stimulus bill passed in response to the COVID-19 pandemic – provides significant student loan relief. Specifically, the law suspends payments, interest, and collections on federal student loans held by the government from March 13, 2020 until September 30, 2020. The suspension is automatic, meaning borrowers did not have to take any loans. positive steps to obtain relief. Their student loan accounts were simply forborne and billing was suspended.
Suspension of payments under the CARES Act is not expected to have negative credit consequences. Months of suspended payments are supposed to be counted in federal loan forgiveness and pardon programs, as if the borrower was still making normal monthly payments. The US Department of Education confirmed to the media that a borrower’s credit should not be affected by forbearance from the CARES Act.
Despite this, some student loan managers appear to report student loans as past due or in default to national credit bureaus.
Student loan managers promise to update credit reports
On May 14, 2020, Great Lakes released a statement saying it was working with major credit reporting agencies to accurately report the status of student loan accounts. The manager did not admit any wrongdoing, saying, “We don’t believe our reports have had an impact on consumer credit scores.” This, of course, directly contradicts the experience of many student loan borrowers.
Robert P., one of the borrowers impacted by the credit reporting snafu, has already seen his score rebound. But other borrowers are still waiting, and it’s unclear how many student loan borrowers have been affected by negative credit reports.
UPDATE: On May 20, student loan borrowers filed a class action against Great Lakes and the major credit bureaus (Equifax, Experian, and TransUnion) in Federal District Court for alleged violations of federal and state law related to the erroneous credit reporting.
What to do with inaccurate negative credit reports
Borrowers and other consumers have important legal rights under the Fair Credit Reporting Act (FCRA).
- Pull your credit. First, if you are unsure whether your student loan status has been accurately reported to the credit bureaus, you may want to consider withdrawing your credit report. Under the FCRA, you are entitled to one free credit report each year from each of the three major credit bureaus (Equifax, Experian, and TransUnion). However, due to COVID-19, Annual credit report offer free weekly reports online until April 2021.
- Contact your lender or service agent to resolve reporting errors. If you see inaccurate negative information on your credit report, contact the entity reporting the information (usually the lender or manager) and ask them to correct the statement. Do it in writing in order to have a record of the request.
- File a formal dispute with the credit bureaus. If the lender or manager does not follow up on your request, you can file a dispute directly with the appropriate credit bureau (Equifax, Experian, or TransUnion) and request the deletion or correction of the incorrect report. Note that only erroneous or inaccurate credit reports can be deleted as a result of a formal dispute. Negative information that was precisely reported – even if there were mitigating factors – cannot be removed.
- Get legal help. If your litigation fails and you’ve been wronged by inaccurate credit reports, you may want to contact a lawyer. The FCRA gives consumers the right to sue a lender, manager, or credit bureau in certain situations involving faulty or inaccurate credit reports, but it depends a lot on your specific situation. You would need to find a lawyer licensed in your state of residence. You can start with the National Association of Consumer Advocates, a national bar association of lawyers specializing in consumer rights.