Trump has begun another trade war. Here's a timeline of how we got here
Canada's leader laments lost friendship with US in town that sheltered stranded Americans after 9/11
Chinese EV giant BYD's fourth-quarter profit leaps 73%
You're an American in another land? Prepare to talk about the why and how of Trump 2.0
Chalk talk: Star power, top teams and No. 5 seeds headline the women's March Madness Sweet 16
Purdue returns to Sweet 16 with 76-62 win over McNeese in March Madness
When federal student loan payments resumed in 2025 after a pandemic-related pause that lasted several years, many borrowers began missing payments, sometimes unintentionally, resulting in a sharp decline in their credit scores.
2.2 million borrowers who missed payments saw their credit scores plunge by over 100 points as student loan payments resumed, and 1 million experienced drops of 150 points or more. According to the Federal Reserve Bank of New York, these steep declines highlight the harsh credit consequences many faced after repayment started.
A credit score is a three-digit number ranging from 300 to 850 that reflects an individual’s creditworthiness and financial reliability. Credit bureaus calculate this score based on payment history, outstanding debt, credit history length, new credit inquiries, and credit mix.
Credit scores are used by landlords, insurers, lenders, and some employers to determine who qualifies for loans, housing, or employment and under what conditions. A low score means higher interest rates, larger deposits, or being denied altogether, making it even harder for vulnerable individuals to achieve financial stability.
Student loan debt, which totals over $1.7 trillion nationwide, is a significant factor in the credit health of many Americans, particularly younger adults and lower-income groups. When borrowers miss payments or fall behind, those delinquencies are reported to credit bureaus and can cause credit scores to plunge, sometimes by 50 to 150 points.
The recent restart of student loan payments exposed many borrowers to this risk, often due to confusion about repayment terms or a lack of clear communication from loan servicers. These sharp credit score declines disproportionately impact those already struggling financially, amplifying preexisting inequalities, according to the report from Liberty Street Economics.
“For the first time in five years, federal student loan delinquencies will start to reappear on credit files. The majority of borrowers who continue to make student loan payments are already seeing positive impacts to their VantageScore credit scores,” said Dr. Rikard Bandebo, EVP, Chief Strategy Officer and Chief Economist at VantageScore.
Delinquency on student loans also restricts access to new credit. Research by the New York Federal Reserve found that borrowers with recent delinquencies experienced a significant decline in their ability to obtain new credit cards and loans, thereby intensifying their financial stress.
Beyond loans, poor credit scores can have drastic effects. They may increase insurance premiums, raise security deposits on rental properties, and limit employment prospects, as many landlords and employers review credit reports as part of their screening processes. This extends the consequences of financial hardship well beyond borrowing, creating structural barriers that reinforce societal divides.
Bankruptcy, often seen as a last resort for those overwhelmed by debt, also severely impacts credit scores and stays on credit reports for up to 10 years. This long-lasting stigma can further limit access to housing and credit, making recovery even more difficult for financially vulnerable individuals.
The complexity of student loan repayment has also contributed to missed payments. Borrowers must periodically recertify their income and family size to maintain eligibility for income-driven repayment plans, which can lower monthly payments and prevent default.
However, missed recertification deadlines can trigger immediate increases in monthly payments and a return to standard repayment terms, often catching borrowers off guard. The U.S. Department of Education advises borrowers to recertify annually to avoid such pitfalls; however, administrative challenges and communication gaps have left many borrowers confused.
Improving a credit score takes time and consistent financial habits. Key recommendations include making timely payments, keeping credit card balances below 30% of credit limits, avoiding unnecessary new credit applications, and regularly reviewing credit reports to dispute inaccuracies.
For student loan borrowers, enrolling in income-driven repayment plans and loan forgiveness programs can help avoid delinquency and credit damage. Government resources also provide free annual credit reports and guidance on maintaining good credit.
Related Articles:
