Remove Federal Student Loans From Credit Reports

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Department of Education and its student loan lenders should not report federal student loans (excluding PLUS loans) on student credit reports for students who are current, in good standing, and have never missed a payment on their student loan.

Many first-time college students are often unaware of the fact that once they are awarded and accept a student loan for a specific academic year, it is then reported to the credit bureaus (Experian, Equifax, Transunion). There is no credit check required to acquire federal student loan, but it does get reported to the credit bureaus almost as soon as it is disbursed to the institution that the student is currently enrolled at.  After disbursement, a portion of it is sometimes sent to the student in the form of a refund once tuition is paid in full.

The problem at hand is that once the institution and or student receives it, it hits the students' credit report and starts affecting it immediately. Although federal student loans are a great way to start building credit, especially for those who have never had credit or wants to improve their credit, it affects the debt to income ratio of a credit report. The higher the student loan amount is on the report, the more it affects the debt to income ratio which can affect many an individual in many ways.

For example, if a student recently graduated with a 50K student loan debt and wants to purchase a home, the student loan is factored into their overall debt to income ratio and their ability to afford the mortgage or home they are seeking. Federal student loans should not serve as a punishment by being reported on student credit reports. Since there is no credit check required to acquire most federal student loans, then why should they get reported in the first place. It’s time to change this by removing or not reporting certain federal student loans, subsidized and unsubsidized loans, to credit reports of students who are current, in good standing, and have not missed a payment on their federal student loans. 



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