Federal student loan borrowers have dealt with a chaotic five years of policy changes, inaccurate payment information, and unfulfilled promises of loan forgiveness. And now, as further uncertainty abounds, many are seeing their payments spike and their credit scores crater. In fact, more than 9 million borrowers "will face significant drops in credit score once delinquencies appear on credit reports in the first half of 2025," the Federal Reserve Bank of New York reported Wednesday.
This is a major change from the early days of the pandemic, when policies put in place by the federal government helped many borrowers stay financially afloat in an economically perilous time. For example, monthly payments and interest accumulation were paused for more than three years, allowing some borrowers to make significant inroads toward paying off their debt for the first time, while the delinquency rate on student loans fell below 1%. As a result, the median credit score for borrowers increased by 11 points from the end of 2019 to the end of 2020.
