By Leslie McFadden, Bankrate.com





Some borrowers with Sallie Mae student loans may have gotten nasty surprises last week if they checked their Equifax credit scores. Their credit scores, based on their Equifax credit files, had plummeted overnight, thanks to erroneous delinquencies reported by Sallie Mae. While some of the borrowers were actually delinquent, many were current on their payments.

What happened
Last Thursday, May 8, Sallie Mae made an error in the way it reported some student loans to credit reporting agencies. Essentially, it reported graduated or extended repayment plans as arrangements for partial payment, causing Equifax, one of the three national credit reporting agencies, to code the accounts as delinquent, even if they were current.

An extended payment plan allows the borrower to pay back the loan over 12 to 30 years as opposed to the standard plan, where the borrower has up to 10 years to pay back the loan. A graduated payment plan begins with low payments and the payment gradually increases every two years over a term of 12 to 30 years.

"There are some repayment plans that on our system are considered a partial payment. They're still in a current status, but they're essentially for an extended or graduated repayment plan, and with our interpretation of these industry guidelines on how to code that (is) where we made an error," says Martha Holler, spokeswoman for Sallie Mae. "What happened was the way a credit bureau translates that, they read that as a derogatory, when in fact that may not have been our intent."

Borrowers with extended or graduated repayment plans who applied for credit or pulled their credit scores in the last three business days may have had "one or more of their accounts show up as delinquent, and had an adverse credit rating," says Tom Joyce, spokesman for Sallie Mae.

Some student loan holders complained in the FICO forums that their FICO scores had dropped 100 points or more due to Sallie Mae's snafu.

Joyce says "less than 10 percent" of their 10 million borrowers, or less than 1 million borrowers, were affected by the mistake.

The plan
Sallie Mae is working with Equifax to correct borrowers' credit reports. Credit scores should return to their standings before the drop within "the next day or so," and any erroneous delinquencies resulting from the misinformation should be removed from the borrowers' Equifax credit reports.

Meanwhile, Sallie Mae will supply a credit reference letter for people who need one to correct their credit score or prove to a potential lender that the error is Sallie Mae's. Sallie Mae urges borrowers concerned about the mistake to call (888) 2-SALLIE or (888) 272-5543.

All credit reporting agencies have been notified of the issue and consumers do not need to pull their credit reports if they have not already done so, nor do they need to dispute the error with the credit bureaus, says Joyce. They should call Sallie Mae directly.

Holler says the coding is being updated so that Sallie Mae's coding guidelines agree with the credit bureaus'. People with graduated or extended repayment plans will not be coded as delinquent -- unless they fall behind on their payments, of course.