Millions of student borrowers are struggling with their loan payments, and this may impact their credit scores. A new report by VantageScore found that over 9 million federal student loan borrowers who are late on their bills may see their credit scores drop by up to 129 points.
This trend is expected to start again after the pandemic-related relief period ended on September 30, 2024. The U.S. Department of Education is ramping up collection activity, which will affect those who are past due on their payments. In contrast, borrowers who pay their loans on time may see an increase in their credit scores by as much as eight points.
According to the report, 43% of borrowers with bills due are behind on payments. This means that around 9.2 million people will face a hit to their credit scores when delinquencies appear on their credit reports between now and May. Experts warn that this can lead to higher borrowing costs across various financial products.
To avoid these consequences, student loan borrowers have options. They can apply for an income-driven repayment plan, which caps monthly bills at a share of discretionary income. Borrowers can also explore deferments or forbearances to pause their payments. For those already in default, experts recommend rehabilitating or consolidating their debt.
It’s essential for borrowers to check their credit reports regularly and ensure that all three major credit rating companies show accurate information about their student loan balance and payment status.
Source: https://www.cnbc.com/2025/03/05/past-due-student-loan-borrowers-may-see-credit-scores-tank-vantagescore.html