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How missed student loan payments are hurting credit scores and what It means for you

June 13th, 2025 4:41 PM by Sam Kader MLO130505

If you’ve noticed a drop in your credit score recently, you’re not alone. Millions of Americans are seeing their credit scores fall—sometimes by more than 100 points—because of missed student loan payments. After a three-year pause during the pandemic, federal student loan payments officially resumed in late 2023, and now, delinquencies are hitting credit reports hard.

Recent data from the Federal Reserve Bank of New York shows that over 2 million borrowers have experienced significant credit score declines, with some falling into subprime territory. These changes can affect more than just your ability to get a loan. They can raise your insurance premiums, make it harder to rent a home, increase your cellphone and utility deposits, and even impact job opportunities.

Many borrowers say they were unaware payments had restarted or thought they still had a deferral. Unfortunately, once a loan is reported as delinquent, it can take years for credit scores to recover—even after the balance is paid.

The timing couldn’t be worse: inflation continues to stretch household budgets, interest rates remain at 20-year highs, and now the federal government is resuming collection efforts on defaulted student loans. Wage garnishment, seizure of tax returns, and Social Security offsets are back on the table starting this summer.

Here’s what you need to know:

  • Check your student loan status immediately with your servicer.
  • Set up auto-pay if possible to avoid missed payments.
  • Monitor your credit score and review your report for accuracy.
  • If you're behind, reach out to your servicer about income-driven repayment plans or hardship options.

The restart of student loan payments has already caused rejection rates for credit cards, car loans, and mortgage refinancing to rise. Even consumers with solid financial history are being affected. If your score has dropped, it could mean higher interest rates or outright denials.

Unfortunately, even a small missed payment can cause lasting damage. The best course of action is to be proactive. Staying informed and reaching out for assistance can help limit the damage and put you on the path to rebuilding your credit. Here's more information on student loan collections


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