Student Loan Defaulters Face Bad Credit Rating

Fri, 01 May 2009

University graduates who default on student loans taken out before 1998 will now be reported to credit rating agencies under new rules announced by the Student Loans Company (SLC) .

Thousands of graduates struggling to repay their pre-1998 student loans could end up having their credit rating damaged, making it harder to obtain a credit card, loan or mortgage, after the SLC was given the right to alert companies such as Experian and Equifax to missed loan repayments .

The SLC said it will be sending letters to around 60,000 UK graduates who consistently fail to make repayments, warning them they risk a default notice and requesting that they get in contact within 28 days to discuss their options.

Student loan customers who have not made arrangements to pay, or deferred (an option for low-earners), within 28 days will be registered with UK credit reference agencies and a black mark will be applied to their name.

On its website, the SLC said that it was introducing the new system "to recover outstanding arrears from customers with pre-1998 (mortgage-style) loans" and to "protect customers from getting into further long-term debt through excessive borrowing ".

The SLC added: "Customers who engage with Student Loans Company and make suitable arrangements to repay or to defer repayments will not face court action for as long as they keep to their agreed repayment plan."

Loans taken out after 1998 are not affected by the new system as payments are deducted directly from graduates’ payslips. Those who earn less than £25,936 a year have the option of deferring payment.
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