More than 9 million student loan borrowers who are estimated to be behind on payments could see “significant drops” in their credit scores in the first half of 2025, the Federal Reserve Bank of New York warns.
According to a March 26 report from the Fed, some borrowers with a student loan delinquency could experience a drop in their credit score of up to 171 points. Credit scores, which affect a person’s ability to borrow and the cost of borrowing, typically range from 300 to 850, with scores above 670 considered good.
Those who currently have the highest credit scores are expected to see the steepest declines. For borrowers with scores under 620, a newly reported delinquency could still result in an average 87-point drop.
“Although some of these borrowers may be able to cure their delinquencies,” the Fed writes, “the damage to their credit standing will have already been done and will remain on their credit reports for seven years.”
For years, federal student loan borrowers haven’t had to worry about the fallout from missed payments—including wage garnishment and loss of retirement benefits—because collections were paused during the pandemic and for some time afterward. That payment relief officially ended on September 30, 2024.
Now that delinquencies are once again showing up on credit reports, borrowers may face a series of financial setbacks, said Doug Boneparth, certified financial planner and president of Bone Fide Wealth in New York.
“This credit score penalty restricts their access to affordable financing, locking them into a cycle of elevated borrowing costs and fewer opportunities to rebuild their financial stability,” said Boneparth, a member of CNBC’s Advisor Council.
