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How Student Loans Can Affect Credit

2013/03/18 by editor

Student loans are something of a hot topic for me. I have many of them, know friends who are heavily indebted with loans, and have seen countless friends and family graduate from college with what seem to be increasingly bigger loans as the years go on. I think it’s pretty insane the amount that schools charge kids to take classes and get a degree, and I’m sure that’s a big part of the problem. But I also think that college is something of an expected step for students to take after they graduate high school, and sometimes I wonder how much thought really goes into the cost–both upfront and later on in life–that comes with this choice? I’ve seen many parents take out loans in their children’s names, without conversations happening about this transaction and what that translates to for when the student graduates and needs to start paying. Bottom line, I think there needs to be more communication and game plans surrounding student loans, so that when the freshly graduated borrower needs to start paying but doesn’t have a full-time job yet, there’s a plan. Looking on the bright side, student loans can actually help boost a student’s credit, which is good news because it’s generally pretty tough for students to start building credit without an actual credit card. Here is what Jan Miller of Deseret News has to say about how student loans affect credit:

“Many people are curious, and often worried, about the effect that student loans will have on their credit score. They wonder if taking out a student loan will help their credit, or hurt it, and to what degree will it influence overall creditworthiness.

The way that your federal student loans impact your credit is actually quite similar to the way any loan does. Just like any loan or line of credit, they can help your credit score when you make your payments on time — and they can hurt it, if you don’t.”

Click here to read the nine ways that student loans can affect the borrower’s credit score.

Now, people. It’s not like it’s okay to go out and take out more loans with the mindset of “This is good for my son or daughter’s credit score!” What about their wallet? What about YOUR wallet if they are unable to pay? I will always believe that the smartest action is trying to get your kids through school with as little debt as possible. Whether that means they go to community college for a couple of years first, or a state school instead of a private school, or in-state versus away. There are ways to get a college degree without leaving school owing the $25,000 that the average college grad owes these days.


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