I have friends in banking. These are both traditional banks and credit unions. They all have horror stories of student loans and borrowers. For whatever reason borrowers don’t seem to think student loans count towards your credit. In fact they do both good and bad. Being delinquent on your student loans and being negatively reported can have an effect on getting a mortgage, car loan, etc. in the future.
Also depending on the bank, being in forbearance or deferment may not be enough. For many financial institutions, if the loan comes out of the forbearance or deferment during the course of the loan term, they will factor in a payment for it even if there isn’t one currently. This is because even if you don’t have to make the payment now, you will have to make it later, and they want to make sure you can.
Not only can these loans affect your credit, but also your debt to income ratio which is a another major factor in banking today. Even with a good payment history overall, if your lender feels as though you have too much debt present, it can cause problems down the road if you want to take on new payments.
What does this mean for you? Simple, you may feel student loans are necessary, and they may be, but borrower responsibly. I know someone who once rolled their books, apartment, and car into their loans and another who used their extra loan money to go on vacation. Anything you can pay out of pocket along with other responsible borrower techniques will help you and your fiscal health down the road (plus it will save you from the sticker shock of your first payment number!)
Find out how an experienced loan counselor can coach you to student loan success!