Friday, February 19, 2016

Better make sure your student loans are paid off

An interesting case came to my attention this week when a Texas man was arrested by U.S. Marshalls, hauled before a judge, and made to sign a repayment plan for a nearly 30 year old student loan debt.

In the article, the man says he thought that the loan had been taken care of during a consolidation process some time ago.  It appears that this was not the case.

If you do consolidate your student loan debt, I highly recommend that you get a copy of your credit report after you've left time for the lenders to report back to the three credit bureaus.  What you will want to see is that the original loans are paid off and the new lender listed. 

Be sure to check totals to ensure that everything is correct.  You should check your credit report at least yearly.  The FTC has excellent advice on obtaining a free credit report.  It's better to stagger the reports that you request as that gives you the best chance to have an ongoing check throughout the year if you request one bureau every 4 months.  At a bare minimum, look at least once a year.  The three bureaus' reports may not match exactly.  It's possible that one bureau would pick up something that another does not.  This has happened to me before.

That said, I'm a bit surprised that this gentleman did not have his student loan debt offset with a refund he might have received after his payment to the outstanding loan lapsed for whatever reason.  I have a friend who got a rude surprise when her refund was severely offset by her student loan being unpaid for some time due to financial difficulties.  Here's a link on student loan debt offset via IRS tax refunds. 

In short, it's always a good idea to ensure that any debt that is consolidated and/or paid off is reflected properly on your credit report.  Checking your credit report periodically will help you notice any discrepancies.  Always keep all the documentation when a debt is satisfied in case you need it to clear up a credit issue.

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