Student Loan Delinquencies Hit Record High

Borrowers are falling behind on their student loan payments at a record pace — and their credit scores are suffering the consequences, a new report found.

More than 10% of consumers with a student loan on their credit file haven’t made a payment in more than 90 days, according to a credit trend report released Tuesday from Fair Isaac Corporation (or FICO) — a credit scoring company used by 90% of top U.S. lenders.

Out of the 21 million consumers scored in FICO’s credit report, 10% have scheduled federal student loan payments as of April. Out of that 10% — 3.1%, or 6.1 million consumers, had a student loan delinquency put on their credit report from February to April, according to the report.

The rate of delinquencies reported has increased 25% from last April’s rate of 7.9% to a rate of 9.8% in April of this year, it added.

These delinquencies took a big swing on borrowers’ credit. On average, the 6.1 million consumers with student loan delinquencies saw their credit score drop 69 points in the reported time frame — pushing the average score below 600.

About 25% of these borrowers saw their credit score plunge more than 100 points.

FICO added that another 1.9 million consumers haven’t yet had a delinquency placed on their credit report but haven’t made any payments since last October — and have actually seen their credit rise two points on average. On the other hand, 12.9 million borrowers have made at least one student loan payment since October. Their credit score has dropped one point in the reported time frame.

“The reason for the large score impact is that recency and severity of delinquency are important characteristics in the FICO Score “Payment History” category, which is the most important part (~35%) of the score calculation,” the report said.

Gen Z saw the largest year-over-year score drop of any group since 2020; 34% of Gen Z holds student loans, double the rate of the total scored population.

Borrowers are seeing the impact of unpaid student loans payments on their credit reports for the first time since March 2020 when the CARES Act let consumers pause federal student loan payments until Oct. 2023. However, delinquencies didn’t start showing up until recently thanks to the U.S. Department of Education’s “on-ramp” period from Oct. 1, 2023 to Sept. 30, 2024 that pushed delinquencies being added to credit reports.

Federal student loan delinquencies started showing up on credit reports in February of this year because delinquencies take 90 days to show up after they’re past due, the report said. Under the Trump administration, the Education Department resumed student loan collections in May.