When to Send a Student Loan Goodwill Letter
Miss a student loan payment? It never hurts to send a goodwill letter to the lender explaining what happened.
Missed loan payments could hurt your credit if you don't act fast. Whether you were strapped for cash or forgot to set up a payment before going out of town, that late payment could show up on your credit report and ding your credit score.
[Read: Best Private Student Loans.]
What Happens If My Student Loan Payment Is Late?
While late payment fees may apply immediately, you usually have at least 30 days before your missed student loan payment is reported to the three major credit bureaus.
Generally, private lenders will report your late payment after 30 days of delinquency. If you have a federal student loan from the U.S. Department of Education, late payments are reported after 90 days.
Before you get to that point, consider enrolling in an income-based repayment plan or setting up automatic loan payments. Some lenders will even reduce your monthly interest rate -- usually by a quarter of a percentage point -- for signing up for autopay. Those going through a short-term setback might be eligible for a deferment or forbearance, which allows you to postpone making payments or reduce the amount of your payments.
But if you do miss a payment long enough for it to show up on your credit, sending the lender a goodwill letter is a smart move.
With a goodwill letter, you request that your lender remove, or not add, an accurate negative entry on your credit report. While lenders don't have to follow your request, it can be helpful if they do. Having the negative mark removed may improve your credit score, which could improve your options if you're planning to get a credit card, buy a home or get a car loan.
"A goodwill letter is not always effective, but it is something that can be used under certain circumstances," says Leslie Tayne, debt resolution attorney at Tayne Law Group in New York and author of the money management book "Life & Debt."
[Read: Best Student Loan Consolidation and Refinance Companies.]
Should I
Send a Goodwill Letter?
A goodwill letter may be appropriate if you missed a payment due to a hardship, such as a medical issue involving yourself or someone in your family, a divorce, or a job loss. It's still appropriate to send a goodwill letter if you've made an honest mistake, too.
"Just be honest with them -- they're human beings," says Howard Dvorkin, certified public accountant and chairman of Debt.com. "Don't be afraid to tell them the truth that you've been going through a divorce or that you had an illness or a problem with a sick child."
But if you miss a payment and still demonstrate risk, a goodwill letter probably won't help. This can happen if you have a history of late payments or a high debt-to-income ratio.
A goodwill letter also won't help if your credit report erroneously says you missed a payment. Instead, you should follow procedures to dispute the error on your credit report.
Here are some other reasons you may want to send a goodwill letter:
-- There was a technical issue. Lenders process payments every day but occasionally make mistakes, which means your payment may not have been recorded properly. If this happens, you may want to consider writing a goodwill letter explaining the situation, Tayne says.
-- Your bill was sent to the wrong address. When you move, it's important to change your address with companies to which you pay bills. But if your bill came when you were moving or if it was sent to your old address erroneously, you may want to send a goodwill letter, Tayne says.
-- You have a negative closed account. You may also want to consider sending a goodwill letter to a creditor if an account was closed and charged off and still shows up on your credit report. Closed accounts don't disappear from credit reports immediately, and as long as they show up, an account with a negative history can continue to ding your credit score.
What to Include in a Goodwill Letter
When writing a goodwill letter, start by mentioning that you usually make your payment on time, if that's the case. If your late payment was the result of a hardship, briefly explain it. Include information or documentation that you think will support your case. Be sure to include identifying information, including your account number.
But more importantly, "explain the good stuff as well," Tayne recommends. For example, explain any steps you took or are taking to resolve issues that led to the late payment.
For technical issues or address-change snafus, you may want to provide relevant documents, such as a link to a story about your bank having an outage or a copy of a change of address form you filed with the U.S. Postal Service. Explain the issue thoroughly -- but only with facts.
Also, it could be helpful to explain why you want the late payment removed. If it's keeping you from qualifying for a mortgage, say so.
Avoid making these mistakes when writing a goodwill letter:
-- Writing too much. Don't ramble. "You're asking for the representative reading the letter to do you a favor," Tayne says. That person probably doesn't want to read an opus, so be thorough but concise.
-- Taking a negative tone. Be courteous and professional. "Just be honest and don't be hostile" or threatening, Dvorkin says. "If it was your fault, say, 'It's my fault, I screwed up.'" Even if it wasn't your fault, explain that the situation was out of your control and the lender received the payment after the due date through "no fault of your own," Dvorkin says.
-- Addressing it "To whom it may concern." That's far too impersonal. Try to find a specific person or department to address it to.
Goodwill Letter Sample
Here's a sample goodwill letter template from Tayne that you might mail to a lender:
[Your name]
[Your address]
[Account number]
[Last four digits of your Social Security number]
[Date]
To [Lender Name],
Thank you for the opportunity to discuss my account with you. As you may know, my most recent credit report with [Experian, TransUnion or Equifax] contains [a late payment/late payments] reported on [date(s)] for my [name of account] account.
As you know, I have an excellent repayment record with your bank. I missed the payment(s) due to [loss of income, medical emergency, move, etc.] and since then, [description of how your circumstances have changed or how you've improved your money management]. As you can see, since then, I've also had a record of on-time payments.
My credit is very important to me, and I would like to maintain a spotless history. I'm requesting that you remove that late payment history as a one-time courtesy. I'm planning to apply for [a mortgage, auto loan, etc.], and it's come to my attention that the missed payment on my record could hurt my ability to qualify. I truly believe that it doesn't reflect my creditworthiness and commitment to repaying my debts. It would help me immensely if you could give me a second chance and make a goodwill adjustment to remove the late payment on [recorded date(s)].
Thank you for your consideration, and I look forward to a positive response to my request. Please let me know if there is any more information you would need to make this decision.
Best,
[Your name]
How to Send a Goodwill Letter
Here are some things to consider when sending a goodwill letter:
Send a hard copy. In most cases, your goodwill letter should be typed and sent as a hard copy through the mail. "Email may not be acceptable to some creditors and can easily be lost, plus there's no guarantee it will be read," Tayne says. While picking up the phone may seem more personal, you won't be able to submit supporting documentation or have a record of your request, she adds.
Address it to the customer service department, not billing. Call the toll-free number on your loan statement and ask who to address your letter to. The address on your statement is likely for payments rather than correspondence, unless the statement says so specifically. It's always wise to verify the address. If you're writing to your bank or credit union, you may want to hand deliver your goodwill letter to the manager at your local branch, Tayne says.
[Read: Best Student Loans Without a Co-Signer.]
What to Expect When You Send a Goodwill Letter
While there's no guarantee that a goodwill letter will work, it's always worth a try.
"If you're a good customer, they're probably going to help you because there's no reason for them to alienate good customers," Dvorkin says.
It may take a while to get a response to your goodwill letter. Or, you may not get one at all. If you don't hear back in a timely manner, follow up to see if the letter was received and what its status is.
"As its name suggests, a goodwill letter does not obligate the creditor to do anything to your case if they don't want to," Tayne says. If the lender decides to help you out, it will let you know.
If you send a letter and nothing is done for you, you may want to try again in a month or when you're sure your financial situation has improved. If you've missed a payment or two, pay the late fee and repay the debt so you can get your account back in good standing. "The missed payment will still be on your credit report, so continue to make payments on time to help get your credit score back on track," Tayne says.
Another option if you don't get a response from the lender is to follow up with a phone call to make sure it received your letter and to explain your situation to someone in real time.
Keep a close eye on your credit report. If your lender agrees to remove the late payment, check your reports after about a month to make sure that has actually happened, Dvorkin says.
You can request a free credit report from each of the three credit reporting bureaus -- Equifax, Experian and TransUnion -- once a year from AnnualCreditReport.com.
And if the missed or late payment is still on there, be persistent. You may just have to pick up the phone or send a follow-up letter.
More From US News & World Report
