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Millions of student borrowers risk credit score drops

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  • Over nine million student loan borrowers could see credit score drops as delinquencies rise following the end of pandemic-era relief measures.
  • Some borrowers may experience a decline of up to 171 points, potentially pushing them into subprime credit status, affecting their ability to secure loans.
  • Borrowers can protect their credit by enrolling in income-driven repayment plans, setting up automatic payments, and regularly monitoring their credit reports.

[UNITED STATES] ​The resumption of federal student loan payments has ushered in a challenging era for millions of borrowers, with significant implications for their credit scores. As pandemic-era relief measures conclude, over nine million student-loan borrowers are projected to experience credit-score declines in the first half of 2025 due to delinquent payments. ​

The Impact of Delinquent Payments on Credit Scores

The Federal Reserve Bank of New York estimates that delinquent payments began affecting credit scores earlier this year when the Education Department resumed reporting them. This shift may push approximately two million borrowers into subprime credit status. Delinquencies can remain on credit reports for up to seven years, hindering access to favorable loan terms and increasing borrowing costs.

Magnitude of Credit Score Declines

The extent of credit score reductions varies based on borrowers' initial scores. Those with higher credit scores, such as 760 or above, could see a decline of up to 171 points, while subprime borrowers might experience an 87-point drop. These decreases can significantly impact financial opportunities, affecting eligibility for mortgages, car loans, and other forms of credit.

Factors Contributing to Rising Delinquencies

Several factors contribute to the increase in student loan delinquencies:

End of Pandemic Relief Measures: The cessation of the "on-ramp" period, which temporarily shielded credit scores from delinquencies, has led to the resumption of standard reporting practices. ​

Communication Challenges: Some borrowers, like Shiloh Garcia and Jack Matthews, were unaware that payments had resumed, leading to missed payments and unexpected credit score drops. ​

Financial Strain: The concurrent repayment obligations of student loans and other debts, such as car loans, have increased financial burdens, leading to higher delinquency rates across various loan types. ​

Broader Financial Implications

The rise in student loan delinquencies has broader economic implications. Higher delinquency rates can lead to reduced consumer spending and affect overall economic growth. Additionally, increased debt levels and repayment obligations can strain household finances, leading to higher default rates across various loan types. ​

Strategies for Borrowers to Mitigate Credit Score Impacts

To navigate these challenges, borrowers can consider the following strategies:

Enroll in Income-Driven Repayment Plans: These plans adjust monthly payments based on income and family size, potentially reducing financial strain.

Communicate with Loan Servicers: Proactively reaching out to loan servicers can help explore options like deferment or forbearance before missing payments. ​

Set Up Automatic Payments: Automating payments ensures timely payments, safeguarding credit scores. ​

Monitor Credit Reports: Regularly reviewing credit reports helps identify and address inaccuracies promptly. ​

Consider Refinancing: Refinancing can consolidate loans into a single payment with potentially lower interest rates, though it's important to weigh the loss of federal protections.

The end of pandemic-era student loan relief measures presents significant challenges for millions of borrowers, with potential long-term impacts on credit scores and financial stability. By understanding the factors contributing to these challenges and proactively implementing strategies to manage repayments, borrowers can better navigate this transition and mitigate adverse effects on their financial health.


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