Student loans are deferred for a period of time until the applicant is able to make payments. We are noticing a major problem with these applicants credit score. The interest on the loan is also deferred and increasing monthly. If you understand how the credit score system works, I ‘m sure you can see the problem. The Highest Credit Line is not increased and the balance is going up with the original loan amount remaining the same.

Somehow Student Loans companies e.g. Sallie Mae asserts that this is the correct reporting method. We know that it is not good having loans balance larger than the original amount.  FICO scoring system software is not recognizing the notation that the student loan is in deferment thus reducing credit scores. 

What can we do as Credit Consultants? We can of course, challenge this with the Credit Bureaus but it hasn’t work so-far in most cases that we have tried. As of now, advised your client to pay down the interest to assist in this matter if they are able. This may be a legal matter or an issue for congress. We will keep you posted on any new developments.