Today’s Student Loan Collections Are Slamming Credit Scores Nationwide

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The government has resumed student loan collections, and millions of Americans are watching their credit scores nosedive. After years of pandemic-era payment pauses and grace periods, the bill has finally come due.

It’s hitting borrowers harder than many expected.

Here’s what’s happening: when you miss student loan payments for 90 days, your loan servicer reports it to credit bureaus. That delinquency can tank your score as severely as filing for bankruptcy, the Associated Press reports.

We’re not talking minor dings here. According to the Federal Reserve Bank of New York, 2.2 million borrowers saw their scores drop by 100 points in early 2025, while another million experienced drops of 150 points or more.

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Why these credit drops matter now

Your credit score is your financial passport. When it drops, borrowing gets more expensive, and access to car loans, mortgages, credit cards, and affordable insurance can shrink when you renew or apply for a new policy.

Some employers check credit during hiring. Landlords use scores to screen tenants.

Consider this: a 150-point drop could push you from “good” credit territory straight into subprime. It could mean getting rejected for that apartment you wanted or paying hundreds more in security deposits.

The perfect storm of bad timing

Student loan payments technically resumed in 2023, but the Biden administration gave borrowers a one-year grace period that ended in October 2024. Last month, the Trump administration kicked collection efforts again, with plans to garnish wages and seize tax refunds from those who don’t pay.

This restart comes as many families are already stretched thin. Inflation’s still pinching budgets, interest rates remain elevated, and layoffs continue making headlines.

About one in four people with student loans were more than 90 days behind on payments by March’s end, according to the Federal Reserve Bank of New York.

Middle-aged borrowers hit hardest

Here’s what might surprise you: it’s not just recent grads struggling. The Fed’s study found that borrowers aged 40 and older were most likely to be delinquent. These are not kids fresh out of college. They juggle mortgages, raise families, and deal with medical expenses.

Andrew McCall, 58, of Boise, has about $30,000 in student loan debt from earning his computer science degrees. His monthly payments run $250 to $300, which he finds difficult to afford.

“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,” he told the Associated Press. “My car, my house… Your credit rating becomes a social stratifier.”

Economic ripples are coming

Kevin King from LexisNexis predicts we will see broader economic effects in coming months.

When the government threatens wage garnishment and tax refund seizures, student loans suddenly jump higher on people’s payment priority lists. That shift could trigger a cascade of financial problems as other bills go unpaid.

According to the Associated Press, some borrowers say they never received proper notice before their loans were marked delinquent.

One of them, 28-year-old Dom Holmes, discovered his credit score had dropped 60 to 70 points overnight. With plans to relocate for work, he told AP he’s now concerned about qualifying for a rental.

Your action plan starts today

If you’ve got student loans, don’t wait for a surprise credit hit. Contact your loan servicer immediately to understand your payment status. Yes, wait times are long. Layoffs at the Department of Education haven’t helped, but it’s worth the hold.

Key moves to make:

1. Request your payment history in writing
2. Explore income-driven repayment plans if you’re struggling
3. Set up automatic payments to avoid accidental delinquency
4. Pull your credit report and dispute any errors

If your score has already dropped, start damage control immediately. Payment history makes up 35% of your credit score, so getting current should be priority one. Some borrowers, like Holmes, have begun appealing their score reductions, a step worth considering if you didn’t receive proper notice.

The student loan payment pause felt like free money for years, but reality has returned.

With the government ready to garnish paychecks and grab tax refunds, ignoring these loans isn’t an option anymore. The sooner you face this new reality and make a plan, the better chance you have of protecting your financial future from further damage.