The Fair Credit Reporting Act (FRCA) was enacted in 1970 and was last amended in 2003 to protect your credit information and restrict who is able to access it and for what purpose.
Now of course, because student loans are a debt, they go on your credit report under the FRCA.
But how exactly does the FRCA affect your student loan debt? And what should you do if you have a problem with your student loans listed on your credit report?
This has become more pressing as student loan borrowers have seen their credit scores drop by upwards of 200 points in the last few months. For some, it was because they didn't know payments resumed, but for others, it was a genuine error.
Let’s first look at a quick summary of your rights under the FRCA. (There is a longer, more detailed PDF version from the Federal Trade Commission you can download and read if you would like).
Where To Start
1. You can request the information any of the 3 credit reporting agencies - TransUnion, Experian and Equifax - has on you in any given year for free.
2. Access to your credit information is limited. Any of the three credit reporting agencies cannot just hand your information over to anybody asking for it - not even to your spouse. In order for anyone or any company to lay a hand on your credit report they need to meet one of the following criteria:
- They obtained your consent to ask for and receive a credit report such as when you go to rent an apartment, buy a house , or when you go to buy a car. Typically, as part of the application process, they might be a line you have to sign that gives the agency permission to receive your credit report. Your signature on this line is considered consent.
- The request is being by through the court or via a general subpoena.
- To assess your risk when you initiate a credit card application or insurance purchase.
- As part of child support assessments/cases.
- In business transactions initiated by you.
- In an application for a government benefit where financial responsibility might be implied.
- In criminal investigations where national security is threatened or where terrorism is involved.
3. If an employer requires your credit report before employment, a credit report can only be given to them if you provide written permission.
4. You have the right to dispute errors on your credit report. Credit reporting agencies have the responsibility to investigate every consumer dispute that is reported to them.
5. In general, negative credit information has to be removed 7 years after the delinquency. If it is a bankruptcy, the length of time in this case is 10 years.
6. You have the right to request that your name be removed from marketing lists that are compiled by credit reporting agencies and used to send you “pre-approved offers”.
7. If you are a victim of identity theft, you have specific rights under the FRCA to help you deal with the effects of it. A list of what you are entitled to under the law can be found here.
8. If you have been a victim of identity theft, you can request fraud alerts to be sent to you by the credit reporting agencies.
9. Active duty personnel who are serving away from their active duty stations can also place “active duty” alerts to prevent identity theft.
An important provision under the FRCA is the removal of negative credit items including any unpaid debts after 7 years.
Knowing your rights as a backdrop, let’s now discuss how the FRCA specifically affects your student loan debt.
Private Student Loans
Private student loans are a contract between you and the private lender. Approval of your loan typically depends on your credit score and/or that of your co-signers.
These loans are treated very much like credit card debt under the FRCA. This means 180 days after you default on your loan, the private loan company can report your default to the credit reporting agencies and 7 years later if it remains unpaid, just like any other debt, the negative item can be removed from your credit report.
There may be a statute of limitations to collect the private student loan depending on your state.
It's important to remember that private student loan lenders have recourse to collect the debt, can sue you for the debt, and can enforce a judgement against you for the debt. This also applies to any cosigner for the debt.
Federal Student Loans
Federal student loans are a completely different story when it comes to the FRCA.
There is actually a separate law that governs federal student loans known as the Higher Education Act of 1962 (HEA).
Under this Act, there is no statute of limitations on federal student loan debt. This means that the time the government has to collect on federal student debt and report on defaulted accounts never runs out.
Combining these two Acts, it means that not only will your federal student loan debt be reported to credit reporting agencies 180 days after you default on your loan payment (under FRCA), per the HEA, until you completely pay off all the loans or take advantage of income-based or employment-based plans to help you pay off the loan, it will remain on your credit report indefinitely.
Negative items related to federal student debt are also never removed from your report even if the default was on a few hundred dollars.
Thus it is important if you are on a federal student loan to take advantage of all the provisions made to help you pay them pay off as quickly as possible.
Check out the resources below to get a handle on how you can pay off your federal student loan debt faster.
And for even more resources, you can check out our student loan payment archives here.
Final Thoughts
The Fair Credit Reporting Act is great for protecting your rights as a consumer when it comes to your credit report and it gives you an opportunity to monitor your credit so that negative items on your credit report that have happened to you as a result of real-life circumstances don’t become a life-long punishment.
However when it comes to federal student loans, the Act only goes so far. This again validates the reason why this blog exists in the first place: helping you get out of student debt faster so you can invest richly into your future.
What are your thoughts on the fair credit reporting act and it's impact on student loans? We’d love to hear your thoughts in the comments.
Editor: Clint Proctor Reviewed by: Chris Muller
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.