Student Loan Borrowers Suffer Credit Penalty Due to Reporting Errors

Congress Should Take Corrective Action

A new report from the Student Borrower Protection Center (SBPC) notes that millions of consumers with student loan debt are or have experienced significant credit score drops as a result of errors in reporting by loan servicing companies.

John Albanese explains the impact in a blog post:

In May 2020, the student loan servicer Great Lakes Educational Loan Servicing Inc. provided inaccurate information to the credit bureaus for millions of borrowers, incorrectly indicating that they had chosen to stop paying on their loans (an arrangement known as a “deferment”), rather than indicating these borrowers were current. As many as five million consumers immediately saw an alarming and unexplained drop in their credit scores in the middle of the pandemic, when millions could least-afford the consequences of an error.

Great Lakes is far from alone in misreporting credit information. Despite the passage of the Fair Credit Reporting Act (FCRA) in 1970, credit reporting errors have been a significant and persistent problem for over 50 years. It is well documented that the credit bureaus and furnishers — the companies that provide consumer credit information to the credit bureaus — engage in largely automated processes that are designed more to put up a façade of compliance with the FCRA rather than ensure accuracy in reporting. This report examines the continued…