Consumer Alert: Protecting Your Cash and Credit in College. Part 2: Unpaid tuition can kill your credit score

ROCHESTER, N.Y. (WHEC) — All week long we’re talking about how to protect your cash and credit in college.

This should be offered as a college course because so many students leave the hallowed halls of that esteemed university with a hollowed bank account. You have no money, and you owe money, lots of it. Here in New York, the average cost of tuition at a state university is $7,070. Fees are $1,740, and room and board is estimated at $14,110. The grand total is $22,920.

If you fail to pay your federally-backed student loan, bad things happen. Day one after your missed payment, you’re considered delinquent and may be charged late fees. After 90 days, you’re reported to the three main credit reporting agencies and your credit score takes a major hit. After 270 days, your loan goes into default and is sent to collections.

So there’s no doubt that if you default on a student loan it will affect your credit score, but what if the creditor you owe is the university? Can unpaid tuition affect your credit score? That’s the question I had for one of the financial experts at the credit reporting agency, Experian.

"If you fail to pay your tuition and the school sends that debt to a collection agency, that could appear in your credit report,” said Rod Griffin, Experian’s Senior Director of Consumer Education and Advocacy. “And if a collection shows up in your credit report it’s going to affect your credit score."

"How about that kid who was trying to finance most of their tuition themselves and, they drop out?” I asked. “It’s not that they have a loan, but they have unpaid tuition that they didn’t pay. That can still be turned over to a debt collector, right?”

“Yes, it can still be reported to a debt collector because it’s essentially at that point a debt that you owe to the school. And if it’s reported to a collector, it’s going to show up on your credit report,” Griffin said.

So I made some calls to the SUNY billing office. If you fail to pay your tuition at a state university in New York, it gets ugly quickly. In 30 days, late fees. In 90 days, a fee up to 22%, then an outside collection agency or a lawsuit against you. My colleague, News10NBC Chief Investigative Reporter Berkley Brean has investigated this extensively.

For Wednesday’s consumer alert, I look at some solutions — refinancing versus consolidating those student loans.