by Jeroslyn JoVonn
June 17, 2025
Credit scores are declining nationwide since the government has returned to collecting on outstanding student loans.
Millions of Americans are seeing their credit scores drop following the U.S. government resuming referring missed student loan payments for debt collection.
Borrowers who go more than 90 days without making a payment risk having their delinquent or past-due accounts reported to major credit bureaus by student loan servicers. This reporting can negatively impact their credit, as it factors into the recalculation of their credit scores. With its government-ordered return, there has been a steady drop in credit scores nationwide, the Associated Press reports.
The first quarter of 2025 saw 2.2 million student loan borrowers experience a credit score drop of 100 points, with another one million scores falling by 150 points or more. The Federal Reserve Bank of New York reported that by the end of March, roughly one in four student loan borrowers were over 90 days past due on their payments.
Lower credit scores create more or more costly barriers to accessing car loans, mortgages, credit cards, auto insurance, and other financial services, resources that come in handy during today’s inflation, high interest rates, and industrywide layoffs.
In March 2020, as the COVID-19 pandemic began, the U.S. Department of Education paused federal student loan payments to provide relief amid the economic uncertainty.
Although payments officially resumed in 2023, the Biden administration implemented a one-year grace period that lasted until October 2024. Last month, the Trump administration reactivated the collection process for unpaid student loans, including plans to garnish wages and withhold tax refunds from borrowers who remain in default.
Those who were delinquent at the time collections resumed were surprised with lower credit scores.
“All of a sudden, I was delinquent, even though I’d never received notice,” said Dom Holmes, 28, a nonprofit worker based in Manheim, Pennsylvania.
Holmes said he woke up in early May to discover his credit score had dropped by 60 to 70 points overnight. Now in the process of relocating to a new state, Holmes is concerned that the lower score could make it harder for him to secure a rental.
“I’m at the ideal age where I should be starting a family and buying a home,” Holmes said. “When you destroy me financially, what are the chances I’m able to do that and that’s viable for me?”
A Federal Reserve of New York study found that borrowers over 40 are most likely to be delinquent. Andrew McCall, 58, of Boise, Idaho, still owes about $30,000 for his computer science degree. Unable to afford his $250–$300 monthly payments, he is worried how a damaged credit score could impact his life.
“The fact that this economy is driven by debt to begin with causes my score to be paramount no matter what financial decisions I’m making, outside of going to the grocery store,” McCall said. “My car, my house… Your credit rating becomes a social stratifier.”
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