Student Loan Delinquency Decrease Lowers Borrower Credit Scores By 100 Points Or More For 2.2 Million People

As student loan servicers resumed reporting to credit bureaus in early 2023, over 2.2 million borrowers experienced credit score declines of 100 points or more. The cessation of pandemic relief measures threatens affordable credit options for federal student loan holders, who are already grappling with escalating costs and stagnant wages. This situation may leave them vulnerable to predatory lenders employing exploitative practices. According to a review by the New York Federal Reserve, delinquency rates have reached a five-year peak, with 10% of borrowers 90 days or more behind on payments. Among those newly delinquent, 2.4 million had scores previously qualifying them for loans. Disturbingly, 1 million borrowers noted drops exceeding 150 points. The impact is particularly pronounced among older borrowers, with 18% over 50 showing delinquency. Experts like Lori Trawinski caution that delinquency could force difficult financial choices for individuals nearing retirement, while economists warn of the broader economic ramifications tied to decreased consumer spending and weakened credit profiles.