Student loan delinquencies are spiking across the U.S., triggering major drops in credit scores for millions of borrowers. The sharp rise follows the expiration of pandemic-era protections that had shielded delinquent borrowers from credit reporting.
A recent report from the New York Federal Reserve revealed troubling trends in household debt. While credit card balances dropped by $29 billion due to seasonal repayment patterns, student loan delinquencies jumped from under 1% to nearly 8%.
This surge stems from the end of the federal student loan payment pause, which lasted from March 2020 until September 2023. Borrowers were given a one-year ramp-up period with lenient reporting rules, but that buffer expired in October 2024. By early 2025, missed payments began appearing on credit reports again.
The result has been severe. More than 2.2 million borrowers who fell into delinquency experienced credit score drops of over 100 points. Around 1 million of them saw declines exceeding 150 points.
Borrowers with mid-range credit scores were hit the hardest. Among the newly delinquent group, 2 million had scores between 620 and 719. Their scores fell by an average of 140 points, reducing their access to loans, mortgages, and credit cards.
A smaller group—about 400,000 borrowers—with scores above 720 saw average drops of 177 points. For them, the damage to credit status could be long-lasting.
Meanwhile, 3.2 million borrowers already had subprime scores below 620. Their scores dropped by an average of 74 points, further limiting their borrowing options.
Seven states have student loan delinquency rates above 30%, excluding borrowers with no payment due. Mississippi leads at 44.6%, followed by Alabama, West Virginia, Kentucky, Oklahoma, Arkansas, and Louisiana.
The Federal Reserve warned that over six million borrowers are now either past due or in default. With the return of collections in May, affected borrowers may now face wage garnishment, tax refund seizures, and even Social Security deductions.
Student loan delinquencies surge at a time when over 20 million federal borrowers remain outside of active repayment. About five million owe nothing monthly due to income-based plans.
Experts warn that the ongoing crisis could spill into other sectors. Falling credit scores may restrict Americans’ access to affordable car loans, housing, and general credit.
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