Credit scores can easily fall by more than 100 points
May 13, 2025
- Student loan delinquencies surged in the first three months of 2025, harming the credit scores of millions of borrowers.
- Nearly one in four student loan borrowers were behind in their payments in the first quarter of 2025.
- Outstanding student loan debt grew slightly to $1.63 trillion in first quarter of 2025.
The share of student loan debt that is seriously delinquent, or more than 90 days pastdue, surged to around 7.7% in the first quarter of 2025, up from just 0.5% in the fourth quarter of 2024, according to the Federal Reserve Bank of New York.
The staggering jump comes after student loan borrowers missing payments were given one year starting in Sept. 2023to resume payments without being reported to credit bureaus, a grace period that expired in Oct. 2024.
“The first batch of past due student loans were reported in the first quarter of 2025, resulting in a large jump in seriously delinquent borrowers, said Daniel Mangrum, research economist at the New York Fed, in a statement.
More than 20 million federal student loan borrowers weren’t in repayment and 5 million had a zero dollar monthly payments as of end of the first quarter of 2025, according to The New York Fed.
Missing a monthly student loan payment makes the borrower delinquent and after 90 days of not making a payment, the borrower is at risk of default and will be reported to credit bureaus, according to Federal Student Aid.
More than 2.2million student loan borrowers who became newly delinquent saw their credit scores drop by more than 100 points and more than 1 million saw drops of at least 150 points, The New York Fed said.
Credit scores can fall by as little as an average of 74 points to as much as 177 points, depending on the borrower’s creditworthiness, The New York Fed said.
Seriously delinquent student loan borrowers with the best credit see the biggest drops.
Lower credit scores means borrowers will have lower credit limits and higher interest rates for other debt.
“It is unclear whether these penalties will spill over into payment difficulties in other credit products,” The New York Fed said.
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