Rising Student Loan Delinquencies Cause Significant Drop in Borrowers' Credit Scores, Reports Show
However, the report noted that the delinquency rate for student loans surged from below 1% to nearly 8% following the end of the pause in reporting delinquent student loans.
Student loan payments were paused from the onset of the COVID-19 pandemic in early 2020 until September 2023, which helped delinquencies decline to less than 1%. When student loan payments were resumed, policymakers included a one-year ramp-up period intended to prevent borrowers' missed payments from being reported to credit bureaus. That expired in October 2024, with delinquencies being included on credit reports in the first quarter of 2025.
STUDENT LOAN BORROWERS IN DEFAULT BEGIN FACING DEBT COLLECTIONSMoney pile with graduation cap
Student loan delinquencies have risen since the end of a pandemic era reporting pause.
The report found that while more than half of the newly delinquent borrowers already had subprime credit scores, about 2.4 million borrowers who entered delinquency this year had scores over 620 that could've allowed them to qualify for auto and mortgage loans, as well as credit cards, prior to the delinquency being reported.
There were 3.2 million borrowers whose scores were under 620, representing 56.6% of the newly delinquent population. They saw their credit scores decline by an average of 74 points.
Student loan payments were paused from the onset of the COVID-19 pandemic in early 2020 until September 2023, which helped delinquencies decline to less than 1%. When student loan payments were resumed, policymakers included a one-year ramp-up period intended to prevent borrowers' missed payments from being reported to credit bureaus. That expired in October 2024, with delinquencies being included on credit reports in the first quarter of 2025.
STUDENT LOAN BORROWERS IN DEFAULT BEGIN FACING DEBT COLLECTIONSMoney pile with graduation cap
Student loan delinquencies have risen since the end of a pandemic era reporting pause.
The report found that while more than half of the newly delinquent borrowers already had subprime credit scores, about 2.4 million borrowers who entered delinquency this year had scores over 620 that could've allowed them to qualify for auto and mortgage loans, as well as credit cards, prior to the delinquency being reported.
There were 3.2 million borrowers whose scores were under 620, representing 56.6% of the newly delinquent population. They saw their credit scores decline by an average of 74 points.