Over 9 million student loan borrowers could see their credit scores tank as delinquencies are poised to hit record highs

By Alicia Wallace, CNN

(CNN) — Student loan delinquencies are poised to hit record highs, and more than 9 million borrowers could see their credit scores tank in the first quarter of this year, according to new data released Wednesday.

The Federal Reserve Bank of New York released its latest biennial report that tracks student loan debt loads, delinquencies and related impacts to credit scores.

The latest report provides a snapshot of student loan activity after it was completely upended by the Covid-19 pandemic.

The 2025 Student Loan Update showed that an estimated 15.6% of federal loans — a new record — were likely past due at the end of last year, with more than $250 billion in delinquent debt held by 9.7 million borrowers.

The New York Fed’s estimates are based on Federal Student Aid data available through September 30, 2024. The FSA’s fourth-quarter data is expected to be available after March 31, researchers noted.

New student loan delinquencies have been shown to take massive bites out of credit scores, with deductions averaging 87 points for subprime borrowers and steep 171-point knocks for those with superprime, or excellent, credit standing.

The pandemic provided a reprieve for millions of student loan borrowers, as stimulus checks and payment pauses allowed many of them to bring down their balances. Others’ loans, however, were stuck in limbo and became a political football as the Biden administration’s plans for student loan forgiveness hit a wall of legal challenges.

The 3.5-year payment pause ended in September 2023; however, an additional provision under the Biden administration provided a one-year “on-ramp” where borrowers were shielded from negative effects of a missed payment.

That grace period ended on September 30, 2024; and, based on the New York Fed’s findings — indications that many borrowers were not paying their loans at the same rates as they were pre-pandemic — the potential for negative credit score impacts grew greater.

Since interest and payments resumed in the fall of 2023, a greater share of borrowers had decreased balances, the New York Fed found. However, the share of borrowers whose balances remained the same or grew larger remained well above pre-pandemic levels at the end of 2024.

That was likely due to a combination of non-payment and because a significant number of borrowers were in administrative forbearance as lawsuits held up the Saving on a Valuable Education repayment plan, New York Fed researchers noted.

The latest data shows that student loan debt is becoming more of a burden at a time when the Trump administration’s actions — including dismantling the Department of Education and temporarily halting income-driven repayment applications — could further complicate borrowers’ abilities to manage their debt.

“It’s the ‘you can’t get blood from a stone’ idea: That money’s got to come from somewhere,” Ted Rossman, senior industry analyst at Bankrate, said in an interview. “So people may be falling behind on other [debt] because of the student loan burden.”

While student loan borrowers represent a relatively small share of overall consumer spending, Wednesday’s report shows that some Americans’ finances are becoming increasingly fragile in a period where economic uncertainty and recession fears have been suddenly heightened.

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