Credit Scores Are Dropping For Student Loan Borrowers
Student loan borrowers nationwide are waking up to a harsh new reality: their credit scores are plunging, sometimes by as much as 200 points. As the extended Covid-era protections end, millions of Americans face a sudden, brutal reckoning with student loan servicers reporting late payments or other negative marks to credit bureaus. Given the importance of a strong credit score, a precipitous drop of 100 – 200 points has real implications for borrowers.
Here’s what happened and what borrowers can do proactively and reactively.
What’s Causing Credit Score Issues For Student Loan Borrowers?
Millions of federal student loan borrowers enjoyed a rare reprieve during the pandemic. In March 2020, when the economic shock of Covid-19 hit, student loan payments were paused, and adverse credit reporting was suspended. Later, the Biden administration introduced a one-year “on-ramp” period, from September 2023 to September 2024, designed to help borrowers ease into the repayment schedule without fearing immediate credit damage. The intention was to give people a break while the economy recovered.
Practically speaking, even if borrowers missed payments during this time, those delinquencies were not reported to the major credit bureaus. It was a lifeline designed to help borrowers adjust to renewed economic pressures; however, as with all temporary measures, it was never meant to last forever. From October 2024 onward, any missed payment is reported as a 90-day delinquency, which means that as early as Feb. 1 2025, borrowers who haven’t resumed timely payments are already seeing the fallout. For many, this wasn’t a gradual transition. Instead, credit monitoring services started sending out alerts, and many borrowers began discovering that their hard-earned credit scores were dropping precipitously.
Real People, Real Credit Score Impact
Confusion and anxiety around plunging credit scores have popped up on social media. Newsweek chronicled the cases of several student loan borrowers, including Roman Henry, who was blindsided when he received an email from Experian informing him that his score had fallen from above 800 to just 608. “I will resume making payments in May 2025, and I have no issue paying moving forward,” Henry told Newsweek. “But the issue is now my credit is ruined.” Like many, Henry blamed the drop on poor communication from his loan servicer, Nelnet. Outdated contact information and sporadic notifications left him unaware that payments had resumed, and he was now 90 days delinquent.
Newsweek also highlighted the case of Taylor Scarborough, a 27-year-old San Francisco resident who experienced a similarly shocking turnaround. Her credit card company reduced her limit, and she learned from Credit Karma that her credit score had fallen by over 150 points. “This was the first and only indication that something was wrong,” Scarborough explained. “Nelnet never sent me a 30- or 60-day past-due notice.” She, too, found herself caught off guard—unaware that her account had already been flagged as delinquent. Scarborough told Newsweek that the drop in her credit score “has had an immediate and devastating impact on my financial stability. My credit limit was slashed by $8,000, limiting my ability to cover essential expenses.”
The Mechanics Of The Credit Score Fallout
Credit scores are more than just numbers—they’re the key to one’s financial reputation and unlocking financial opportunities. A high score can mean lower interest rates on mortgages, better credit card offers, and even job opportunities, as some employers review credit history during hiring. When scores drop from the high 800s to the 600s, it isn’t merely a cosmetic blemish—it’s a fundamental setback. Lenders view these lower scores as indicators of higher risk, often resulting in higher interest rates or outright denials for loans.
Once a borrower misses a payment and the account reaches 90 days past due, the delinquency is usually reported to the credit bureaus. This negative mark can remain on a credit report for up to seven years, severely limiting future borrowing potential. The ripple effects extend beyond just loan approvals. Reduced credit scores can lead to higher premiums on insurance policies, less favorable rental agreements, and a diminished ability to invest in one’s future.
The Communication Breakdown Causing Credit Score Damage
At the heart of this debacle lies a systemic communication failure. Many borrowers reported that their loan servicers had outdated contact information—old email addresses, outdated phone numbers, and incorrect mailing addresses. As a result, critical notices about payment resumption and impending delinquency never reached these individuals. Instead of a gentle reminder, borrowers learned about their delinquency through impersonal emails from credit bureaus or sudden cuts to their credit limits.
Henry, the student loan borrower, admitted to Newsweek that “after logging into Nelnet, my email on file was outdated, my mailing address was outdated as I have moved 6 times since 2020,” and that “looking back, I did receive a couple of phone calls from what I now know to be Nelnet, but I never answered as I believe them to be one of the 10+ spam calls I receive daily.” Another borrower had similar sentiments: “I assumed [Nelnet] would contact me when payments restart since the dates were extended multiple times over the pandemic. They also had the wrong address, email, and phone number from long ago. My correct address was on my credit report.”
The transition from the on-ramp to regular repayment schedules was supposed to be seamless, but has proven otherwise. Even when borrowers did receive a few phone calls—often dismissed by student loan borrowers as one of many spam calls—the lack of clear, consistent communication left them vulnerable to falling behind on payments.
What Student Loan Borrowers Can Do To Cure Credit Score Damage
For those who have seen their credit scores suffer due to missed student loan payments, there are steps you can take, albeit with no guarantees:
- Request Retroactive Forbearance: The College Investor highlights that some servicers, like Nelnet, offer borrowers the opportunity to retroactively place their accounts into forbearance, thereby preventing further damage. However, this does not erase the delinquency already reported to the credit bureaus.
- Goodwill Removal Requests: Borrowers can ask their servicers for a one-time courtesy removal of the 90-day delinquency mark. While not guaranteed, there have been cases where servicers have acceded to such requests. Given the widespread confusion over the end of pandemic protections, borrowers have nothing to lose by contacting their services and politely pleading their case.
- Dispute Errors: If you believe your delinquency was reported in error—perhaps due to miscommunication or administrative mistakes—file a dispute with Equifax, Experian, and TransUnion.
- Enroll in an Income-Driven Repayment Plan: If your financial situation makes timely payments challenging, consider enrolling in an income-driven repayment (IDR) plan. Not only can these plans lower your monthly payments based on your income, but consistent on-time payments under an IDR plan can help rehabilitate your credit score over time.
- Monitor Your Credit: Regularly review your credit reports through annualcreditreport.com. Early detection of errors or unauthorized delinquency reports is crucial for timely correction. You can often set up alerts, including through your bank or credit card company, for changes to your credit.
- Update Your Contact Information: Ensure your loan servicer has your current email address, mailing address, and phone number. This may seem obvious, but many borrowers have fallen victim to outdated records—making it nearly impossible to receive timely payment notification
- Take Active Steps To Rehabilitate Your Credit: Borrowers whose credit scores have been impacted should focus on paying future bills on time and keeping their credit utilization low. These two factors make up close to two-thirds of what impacts one’s credit score, and consistently strong marks should help improve scores after a few months.
The Upshot For Student Loan Borrowers’ Credit Scores
The end of the federal student loan on-ramp period marks a turning point for millions of borrowers—a moment when the protective shield of deferred credit reporting is lifted, exposing them to the harsh realities of missed payments and negative credit marks. To prevent their credit scores from dropping precipitously, borrowers must proactively safeguard their credit, update their contact information with student loan services, and dispute erroneous reports.
Related Reading For Student Loan Borrowers:
Will Student Loans Be Cancelled If Trump Shuts Down Department Of Education?
Student Loan Payments Could Soar By $200 A Month, On Average
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