A Growing Student Loan Crisis
In May 2025, the U.S. Department of Education resumed collections on defaulted student loans after years of pandemic relief. The result? Nearly 1 in 5 borrowers are now 90+ days late on payments, a level of delinquency that can cause devastating financial consequences.
How Defaults Damage Your Credit
Missing a student loan payment doesn’t just create stress — it lowers your credit score. Even one late payment can drop your score by 30 points. After 90 days, the damage intensifies, with drops of up to 170 points reported. These black marks can remain on your credit report for seven years, making it harder to:
Qualify for mortgages or auto loans
Rent an apartment
Get approved for credit cards
Even secure certain jobs
👉 If you want a deeper breakdown of how credit scoring works, check out our guide on understanding credit reports (internal link example).
The Bigger Picture: U.S. Household Debt
Student loans aren’t the only challenge. According to the Federal Reserve, total household debt in the U.S. has surpassed $18 trillion — with student debt playing a major role. (New York Fed Report)
In early 2025, nearly 6 million borrowers were already in default or 90+ days delinquent. By February, that number surged past 20%, even higher than the 2012 peak. Surprisingly, it’s not just borrowers with poor credit — prime borrowers have lost 100–175 points on average, proving this crisis impacts everyone. (MarketWatch)
Steps to Avoid or Recover from Default
The good news: borrowers have options if they act quickly. Here are three solutions:
Income-Driven Repayment Plans – Adjust monthly payments based on your income.
Loan Rehabilitation – Make a series of on-time payments to remove the default status.
Loan Consolidation – Combine multiple loans into one with easier payment terms.
What This Means for Borrowers
Credit control is critical. Defaults damage financial stability for years.
Early action pays off. Contact your loan servicer before your account reaches default.
Help is available. Explore federal programs and professional credit guidance.
For more resources on repairing credit after a default, visit The Parker Method to see how we help consumers fight back against errors and protect their financial future.
