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Why is my old student loan and my refinanced loan on my credit report?

Seeing double student debt on your credit report is scary. Fortunately, this issue often quickly resolves itself.

Written By: Michael P. Lux, Esq.

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Occasionally, borrowers who refinance their student loans will see both their old loans and the new loans on their credit report.

Seeing double the debt is concerning. However, this issue normally resolves itself fairly quickly.

A Student Loan Sherpa Reader recently faced this issue…

Reader Question: Why am I Seeing Double the Debt my Credit Report?

Reader Nick writes:

What benefit would Mohela/SOFi receive for keeping my formerly refinanced loan active on my credit report? I refinanced from Mohela/Sofi to Earnest six months ago. I randomly checked a credit report that showed both loans as “active” despite the Mohela/Sofi loan being paid in full. A letter to the credit department at Mohela quickly moved the loan to “paid”.

Refinance Procedure

When you refinance your student loans, the new lender, in Nick’s case Earnest, pays off the old loan with the old lender, in this case SoFi. Based on Nick’s email it sounds like both loans appeared on his credit report, essentially showing double the student loan debt.

The Most Logical Explanation for Old and New Loans on a Credit Report

In most cases, the two loans both showing up on the credit report is normal. Lenders do their monthly reporting at different times, so it is perfectly reasonable to see both loans on a credit report done close in time to the refinance.

Additionally, there is also a slight delay that should be expected. The new lender will want the loan to appear on the credit report as soon as the check is issued. The old lender will keep the old loan on the credit report until the check is mailed and processed. This processing time could also explain many occurrences for both loans to appear on the credit report.

The Concern of Longer Delay

What makes Nick’s case very unique is that both loans appeared on his credit report for over 6 months. This should never be a part of the process. Given how quickly the error was resolved, it sounds like Mohela was able to recognize the issue and get it fixed.

As far as finding a motive for Mohela to keep the loan active, I can’t think of one. The debt has clearly been paid in full and it sounds like all parties agree. Mohela has no financial incentive to have a loan appear on the credit report if they know the loan has been paid in full.

Nick’s Smart Moves

Based on Nick’s email, there are a couple of really smart decisions he made.

First, he was savvy enough to refinance a refinanced loan. Unlike refinancing a house, there is no cost to refinancing a student loan. In fact, many student loan lenders offer cash for new customers. Even though he already refinanced his student loans, Nick kept a close eye on his finances and the market, and when the opportunity came to make things even better, he pounced.

Second, Nick was watching his credit report. By identifying the error relatively quickly in time he was able to send one quick letter and get his problem addressed. Had he done so years later, this situation could have been much more difficult. By law, everyone gets to see their credit report once a year, but people can pay for extra reports. We recommend checking your credit report at least once a year. Nick’s situation is a good example of why it is important.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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