Student Loan Balance Says Zero? Here’s Why

You check your credit report, and your student loan balance says zero. Or maybe your loan was closed. Or, even better, the loans disappeared completely. Whatever it says, you get excited because you hope it means you’re free from the debt that followed you for years. I hate to break it to you, but that probably isn’t what happened.

Here’s what those statuses probably mean:

• Paid in full – the loans were recently consolidated or were commercially held Federal Family Education Loans that defaulted and were sold to the guaranty agencyGuaranty AgencyA state or nonprofit agency that administers defaulted FFELP loans and acts on behalf of the federal government in collecting those debts. that owns the debt.
• Closed – the loans were sent to a new servicer.*
• Zero balance – the Education Department may have forgiven the student loan debt, but what’s more likely is that the loans were moved to a different servicer.
• Disappeared – the loans defaulted several years ago and fell off the report.

Unless you got word from the federal government or a private lender like Navient that your loans were wiped out, the likely answer is that your loans moved to a new company, and you still owe the balance.

Learn More: Student Loan Account Closed Due to Transfer

* Last year, three companies — FedLoan, Granite State Management, and Navient — ended their contracts with the Education Department. The department had to move millions of borrowers to new servicers. Many of those moves have happened, but more are still to come before federal student loan payments resume.

Why your student loan balance disappeared

Your student loans may be gone from your credit report or show a closed or zero balance. Don’t get too excited! It’s doubtful that you’ve escaped. The loans have likely moved to a new servicer who will report the debt soon — unless you defaulted long ago. In that case, the loans won’t return. They’ll sit and wait, ready to pounce on you when you least expect it.

Sure, your student loans’ mysterious disappearance from your credit report could be because the loans were forgiven as part of the piecemeal fixes the federal government made to existing student loan forgiveness programs. Those changes have led to billions of dollars in debt cancellation for hundreds of thousands of borrowers with federal loans.

Related: Student Loan Borrowers in Shock Over Zero Balance

But if that was the case, you would’ve gotten a letter or email from the department or your student loan servicer confirming that your loans were forgiven or canceled under a specific program. For example, if you applied for the Public Service Loan ForgivenessPublic Service Loan Forgiveness (PSLF)A federal program that forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for a government or qualifying nonprofit employer. Program or the PSLF Waiver, FedLoan Servicing would have sent you a letter like this confirming that your student loan balance was zero because it was erased:

PSLF Award Letter

What does paid in full by consolidation mean?

Paid in full by consolidation in student loan terms means that multiple loans have been combined into one larger loan — typically with improved repayment terms, such as more flexible repayment options, lower monthly payments, or greater loan forgiveness opportunities. This results in the full repayment of the consolidated debt and a “paid in full” status for the borrower.

In the past, federal student loan borrowers consolidated their loans through either the Federal Family Education Loan ProgramFederal Family Education Loan Program (FFELP)The federal program that guaranteed student loans made by private lenders through 2010. Loans issued under this program are commonly called FFELP loans and are still held by millions of borrowers. or the Federal Direct LoanDirect LoanA federal student loan made directly by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program. Most federal student loans issued since 2010 are Direct Loans. Program. But the FFEL Program was discontinued by Congress in the early 2010s. As a result, borrowers who apply for student loan consolidation now receive a Direct Consolidation Loan.

You can view your past consolidation loan applications on StudentAid.gov.

Note: Consolidating won’t save you money by getting you a lower interest rate. The new loan will have a fixed interest rateFixed Interest RateAn interest rate that stays the same for the life of a loan. Federal student loans carry fixed rates; some private student loans offer fixed or variable options. for the life of the loan based on the weighted average of your existing rates.

Related: How to Apply for Student Loan Forgiveness

Check your loan status

Maybe your letter got lost in the mail, or the email was delivered to your spam folder. That’s possible. Here’s how to discover if you still owe federal student loans:

Call the Federal Student AidFederal Student Aid (FSA)The office within the U.S. Department of Education that manages federal grants, work-study, and student loans. It runs the FAFSA, the StudentAid.gov website, and oversees the federal loan servicers. Information Center at 1-800-433-3243. Provide the representative with your Social Security Number and birthday and ask that they check the National Student Loan Data System to see if you have loans with an outstanding balance. If you don’t, congratulations. You no longer owe federal student loans. But if you do, get the contact information for the student loan servicerLoan ServicerThe company that manages a borrower's federal student loan account, processes payments, and handles applications for repayment plans, deferment, forbearance, and forgiveness on behalf of the U.S. Department of Education.. Work with that company to determine repayment options before the pandemic forbearance ends.

You can also use StudentAid.gov to view your loan history with the U.S. Department of EducationU.S. Department of Education (ED)The federal agency that oversees federal student aid programs, issues regulations for federal student loans, and is the ultimate lender on Direct Loans..

For private student loans, contact the loan holder and ask the same question: do I still have a balance? If you don’t, ask if your loans were canceled or charged off and sold to a collection agency. Read more about how to get rid of private student loans.

Related: Does Student Loan Default Affect Credit Score

Options if you still owe student loans

If it turns out that your loans weren’t forgiven, here are four things you can do before the forbearance ends to put yourself in a position to have an affordable monthly payment and eventually get your loans forgiven:

Sign up for income-driven repaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments.. IDR plans cap your student loan payments at 10-20% of your discretionary incomeDiscretionary IncomeFor federal income-driven repayment plans, a borrower's adjusted gross income minus a set percentage of the federal poverty guideline for their family size. Monthly IDR payments are calculated as a percentage of this amount.. The plans come with an added benefit: loan forgiveness after 20 to 25 years of payments. Read more about income-driven repayment forgiveness.

Get out of defaultDefaultThe status of a federal student loan after the borrower has failed to make required payments for 270 days. Default can trigger collection actions such as wage garnishment, tax refund offset, and damage to credit reports.. Delinquency and default block most paths to loan forgiveness. Plus, student loan default puts you at risk of having your wages garnished, tax refund seized, and Social Security benefits offset. Getting out of default will restore your eligibility for income-based repaymentIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments. plans, deferments, loan forgiveness, and so on. It will also improve your credit score.* Read more about how to find defaulted student loans and how to get student loans out of default.

Consolidate if you have FFEL Loans. The Education Department announced it would make a one-time account adjustment to give borrowers credit towards IDR forgivenessIDR ForgivenessThe forgiveness of any remaining federal student loan balance after a borrower has completed 20 or 25 years of qualifying payments under an income-driven repayment plan, depending on the specific plan. to fix issues related to forbearance steering. Eligibility for this benefit is limited to borrowers with department-held loans. If you have commercially held FFEL Loans — you have these types of loans if you had to make payments throughout the pandemic — you must refinance the loans into a new Direct Consolidation Loan to qualify. Read more about the IDR account adjustment.

Apply for borrower defense. Around 200 thousand former students who went to for-profit schools they said defrauded them will have their loans wiped out under a deal the Education Department struck to settle claims pending from the Trump administration. Check the borrower defense school list to see if your school is listed. If it is — or even if it isn’t, but you believe your school lied to you about job placement, job readiness, the transferability of credits, and so on — submit a claim on studentaid.gov. You may be eligible to get your balance erased.

Related: What Increases Your Total Loan Balance?

\* In April, the Education Department announced it would automatically restore all borrowers in default with federal loans to good standing before payments resume. Read more about the student loan fresh start program .

Bottom line

The Biden administration is also proposing to stop interest capitalizationInterest CapitalizationThe addition of unpaid interest to the principal balance of a loan. After capitalization, interest begins accruing on the new, larger principal, which increases the total cost of repayment., change forgiveness programs permanently to make it easier for public servants, disabled people, and people who went to schools that closed abruptly or defrauded their students to get relief and introduce a new income-driven repayment plan that lowers monthly payments and leads to loan forgiveness sooner.

Given all those changes, maybe your loans were wiped out, which would explain why your student loan balance decreased or shows closed on your credit report. But before you jump for joy, contact the Education Department and confirm your loan status. The more likely explanation is that your loans were moved to a new company — work with them to find a payment plan you can afford.

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