Undergrad Loan Confusion?

[Kochanie]

Hello, I took a subsidized loan to help pay for summer classes. I know I have the rest of my undergraduate career before I start to rack interest, but I'm a bit confused.

I don't know how to pay it back. When I log into the studentloans.gov page, there is no option to make a payment?

My credit score decreased a lot by taking out this loan. I don't even know how it's possible for a credit score to decrease 100 points for a few thousand in loans when many undergrad students have tens of thousands. I'm scared this will negatively affect me when trying to get an apartment for next year or anything else that requires a good credit score?

Is there a way to pay back the loan that will help my credit? I was thinking of just putting down everything I have or making small payments for the next two years (when I graduate). Which of these two options is better, if either?

Thank you for any help, I'm very confused and new to this.

---

Members don't see this ad.

 

[moisne]

Loans should NOT decrease your credit score like that - only when you miss payments do they decrease. I had a mortgage (similar to loans) and my score increased. Having debts and paying them off is good for score not bad.

 

[kyamh]

Every institution you borrow from is a little different.

I figured out how to start paying by tracking down all the various emails I got in the process of setting up my loans. One of these emails gave instructions about how to log into the right place, since often the place to pay is not the place where you borrowed. If you don't find the right information already in your mail/email, then just call customer service. It will take 15 minutes of your time and they can answer all of your questions.

Loans do not decrease your credit score, as @moisne said. In addition to making late payments, however, not making any payments at all on a loan will also tank your score for a bit. If I understand right, this is your first major credit adventure, meaning that you have not proven yourself to be an on-time payer of balances. As soon as you start paying, your credit score will bounce back, don't worry. If you are worried about your score keeping you from apartments and the like, you should probably relax. Typically, a score of 600+ will put you in the clear, sometimes even lower scores are alright for passing a credit check. If you are worried about it, you should start to make payments a few months before you anticipate your score being checked to give it a chance to recover.

Making many, on time, smaller payments will do more for your credit score. I think that most of my accounts on the credit report go back 1.5-2 years. Having 24 on time payments in a row on your report is better than having 2 on time payments followed by no activity. Obviously, if you don't pay it off all at once then you are collecting interest, which loses you money. Unless you score is actually poor (600 or lower) then I would worry much more about losing money than about building credit, but people's opinions vary

 

[ciestar]

Government loans are weird. Mine are serviced by another loan servicer. But I make payments through them.

Your credit score does go down temporarily when you open a new loan. Just make payments on time when you have to, pay down the loan, and find ways to build up your credit. Some banks have these handy credit cards for people with low/no credit that helps raise your score after a certain amount of time with on time payments and whatnot.

 

[Kochanie]

Thank you! It may be the credit tracker I'm using, but since that appeared as a strike against me, it showed a 101 drop which is insane.

I will make small payments, but they don't start collecting until after I graduate. Should I wait until then or can I start making small payments and have it benefit me now?

 

[ciestar]

They're deferred until graduation, yes. Depending on what loan you have, it may or may not accrue interest. Since you have the subsidized one, it won't accrue interest. If you can make payments on it, go for it. If not, you're not required to.

 

[Kochanie]

They're deferred until graduation, yes. Depending on what loan you have, it may or may not accrue interest. Since you have the subsidized one, it won't accrue interest. If you can make payments on it, go for it. If not, you're not required to.

Thank you! I just have to figure out how now.