Student Loan Late Payments Hit Credit Scores Hard
As of July 2025, millions of Americans are grappling with the fallout of late student loan payments, which are now significantly impacting personal credit reports. After a pandemic-era payment pause ended in October 2023, followed by a 12-month “on-ramp” period, the U.S. Department of Education resumed reporting delinquent federal student loans to credit bureaus in late 2024. This has led to a surge in delinquencies, with severe consequences for borrowers’ credit scores.
Rising Delinquencies and Credit Score Drops
Recent data from TransUnion reveals that 31% of student loan borrowers with payments due are in “late-stage delinquency” (over 90 days past due) as of April 2025, the highest rate ever recorded. The Federal Reserve Bank of New York reports that 2.2 million borrowers saw their credit scores drop by 100 points, with another million losing 150 points or more in Q1 2025. VantageScore notes that late payments can tank scores by up to 129 points, while the Fed warns of drops as high as 171 points. These declines can mean higher interest rates, denied loan applications, or even challenges renting an apartment.
Why This Is Happening
The resumption of collections, coupled with systemic issues like outdated notices and glitched online portals, has caught many borrowers off guard. Some received no notification of resumed payments, leading to unintentional missed payments and derogatory marks on credit reports. With 5.8 million borrowers over 90 days delinquent and 5.3 million in default, the scale of the issue is unprecedented.
What Borrowers Can Do
To mitigate damage, experts recommend:
Check Your Credit Report: Review reports from Experian, Equifax, and TransUnion at AnnualCreditReport.com to spot errors.
Set Up Auto-Pay: Ensure timely payments to avoid further delinquencies
Contact Your Servicer: Explore consolidation or rehabilitation options if you’re behind.
Seek Credit Advocacy: Platforms like Hatch Credit can help challenge incorrect marks under the Fair Credit Reporting Act.
The Bigger Picture
Late payments can linger on credit reports for seven years, impacting access to credit, housing, and jobs. With wage garnishment looming for defaulters, borrowers face a critical moment. Staying proactive—monitoring reports, budgeting, and communicating with servicers—can help navigate this challenging landscape.
