Student Loan Borrowers may have lower Credit Scores due to CARES Act

Last month, many student loan borrowers who have credit monitoring services received notifications of a change in their credit score. Those who investigated why there was a change found that a remark was added to their credit report. This type of change with the uncertainty and financial stress that the pandemic had created, was another challenge that piled on to millions of Americans.

Credit scores are important criteria that lenders use to determine a person’s creditworthiness for an auto loan, mortgage, personal loan, or other types of loans. Landlords also use credit scores to decide whether to rent to a potential tenant.

What the CARES Act did for Student Loan Borrowers

The Coronavirus Aid, Relief, and Economic Security Act, or Cares act was signed into law on Friday, March 27, 2020. Its purpose was to help address the economic downturn that was caused by the COVID-19 pandemic. The largest economic stimulus package ever in U.S. history responded with relief in the form of tax credits, loans, unemployment benefits, and more.

Specifically for those who have federal student loans, the CARES Act suspended all payments from March 15, 20202 to September 30, 2020. All federal student loans were put on this deferment automatically, without any action necessary by the borrower. The CARES Act also held all loans during this time at a 0 percent interest rate. That means the interest on your student loans won’t accrue during this period either. Any payments that borrowers make during this time go against the principal of the loan.

Why Credit Scores were affected by the CARES Act

It was uncovered by these borrowers who questioned the negative impact of their credit scores that Great Lakes and its parent company, Nelnet were reporting the forbearance period in the CARES Act so that it had a negative effect on borrowers. About 40 percent of the government’s student loan portfolio is serviced by Great Lakes and Nelnet. That comes out to be about 5 million student loan borrowers.

The instructions that were provided by the Department of Education to servicers were to report the forbearance period to indicate they were current on their loans and mark the borrower owed/paid $0 monthly payments. Alternatively, these $0 monthly payments were reported as deferred by Great Lakes.

What to do if your Credit Score was affected

Great Lakes has acknowledged that this was their error and they didn’t realize that borrower’s credit scores would be affected. On May 15th, all four of the credit reporting agencies received updated credit files from Great Lakes. So the issue should be resolved but borrowers if you do see a drop in your credit score, take the following actions:

● Get a free copy of your credit report from
● Dispute any information that you find is inaccurate
● Place a note on your credit file directly to your credit report. You can insert a statement in your credit report. Make a note that sounds something like “Please be advised that negative information or negative action on my credit report is related to COVID-19.”

Do you have questions on student loans or think your credit score was impacted by the CARES Act, contact Student Loan Medix. We are here to help with a free, no-obligation consultation. Call us at 480-676-2889 or email us at