The resumption of student loan payments has led to severe credit score declines for millions of borrowers, particularly as with delinquency starting after just 90 days. This decline exacerbates financial struggles already worsened by inflation and high interest rates. The Federal Reserve Bank of New York noted that 2.2 million borrowers experienced credit score drops of 100 points or more. The U.S. government had paused payments during the pandemic but resumed collections in 2023, complicating borrowers' financial situations further. Overall, credit access is increasingly precarious for those with delinquent loans.
Millions of Americans are seeing their credit scores suffer now that the U.S. government has resumed referring missed student loan payments for debt collection.
A lower credit score makes it harder or more expensive to obtain car loans, mortgages, credit cards, auto insurance and other financial services at a time when inflation, high interest rates, and layoffs have strained the resources of some consumers.
The Federal Reserve Bank of New York reported that in the first three months of 2025, 2.2 million student loan recipients saw their scores drop by 100 points.
Despite the Biden administration's one-year grace period ending in October 2024, the Trump administration restarted collections, planning to seize wages and tax refunds.
Collection
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