Borrowers Face Credit Score Hits as Student Loan Payments Resume
- Liam Rhattigan
- Apr 1
- 2 min read
As the U.S. continues to put pandemic-era relief programs behind it, a tough reality is hitting home for millions of student loan borrowers. Credit scores are starting to fall dramatically. A new report from the Federal Reserve Bank of New York estimates that more than nine million people could see their credit take a serious hit in early 2025, all because they’ve struggled to restart payments on their student loans.
When COVID-19 hit, the government hit pause on federal student loan payments to help borrowers weather the financial storm. That pause was extended several times, and even after payments technically resumed, people were given a 12-month “on-ramp” period. During that time, missed or late payments weren’t reported to credit bureaus. However, that grace period officially ended in September 2023, and now, the consequences are starting to show up. Loan servicers have resumed reporting delinquencies, and already, nearly 10 million borrowers with over $250 billion in unpaid student loans are affected.
Missing student loan payments can tank credit scores, especially if people had good credit to begin with. According to the New York Fed, someone with a score above 760 could see a drop of up to 171 points. Even borrowers with lower credit scores (below 620) could lose around 87 points. That kind of drop can make it harder to qualify for things like car loans, mortgages, or even basic credit cards. While the “Fresh Start” program was put in place to help people get back on track without penalties, fewer than a million borrowers have used it, leaving millions more vulnerable to financial setbacks.
Restarting student loan payments has turned out to be a major challenge for a lot of people. With delinquencies now rising higher than they were before the pandemic, many borrowers are being pushed into a tough spot financially. Without more support or long-term solutions, millions could be facing not just a drop in their credit scores, but in their overall financial well-being too.
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