Credit Score Changes as Student Loan Payments Resume

Federal student loan payments are back after a multi-year pause, and for millions of borrowers this could mean major changes to their credit scores. According to a new analysis by VantageScore, some borrowers will benefit from resumed payments, while others may experience significant declines in their scores.

With more than 22 million borrowers now out of forbearance, the effects are beginning to show. Here is all you need to know about how student loan payments on your credit report impact your score and what you can do to protect it.

The Good News: On-Time Payments Can Boost Your Score

Borrowers who resume student loan payments on time will likely see an increase in their credit scores. This is because payment history is a major factor in credit scoring. Those who consistently make on-time payments will strengthen their credit profiles and improve their long-term financial standing. 

For younger borrowers and those with limited credit history, this resumption of student loan reporting could be their first opportunity to establish a solid credit foundation. Resuming payments can help them build a track record of responsible credit use, which is crucial for financial growth. 

The Bad News: Millions Face Significant Credit Score Drops

Unfortunately, not all borrowers are in a position to resume payments. Millions of Americans who are behind on their student loans could see their credit scores drop significantly. This could make it harder to qualify for new credit, secure favorable interest rates, and even rent housing. Legal challenges to portions of the Saving on a Valuable Education (SAVE) Plan have created uncertainty that may increase delinquencies as borrowers navigate changing eligibility and payment requirements.

National Credit Score Decline Expected

With millions of borrowers struggling to make payments, VantageScore’s analysis expects the national average VantageScore 4.0 credit to drop by two points, from 702 to 700. While this may seem like a small shift on a national scale, it reflects the widespread financial strain that student loan borrowers are facing. If delinquencies continue to rise, lenders may tighten their approval criteria, making it harder for consumers to access credit.

What’s Next for Student Loan Borrowers?

Federal student loan servicers are now reporting delinquencies to the three Nationwide Consumer Reporting Agencies (NCRAs). Currently, an alarming 43% of borrowers with payments due – approximately 9.2 million Americans –  are behind on payments as of February 2025. 

If you are a borrower, here are some actions to take:

• Make payments on time whenever possible: Even partial payments can help maintain your credit standing and demonstrate good faith toward your loan obligations
• Contact your loan servicer proactively: Don’t wait for them to reach out – schedule a call to discuss your specific situation and ask about hardship options that might be available for your loan type. 
• Monitor your credit: Stay vigilant about changes to your score and address any unexpected drops immediately to protect your financial future.
• Report your rent payments: Help balance the impact of sudden loan issues and build positive payment history through your largest monthly expense.

The Bottom Line

The return of student loan payments is creating a financial divide in America. Those able to make consistent payments will likely see their credit scores improve, while the millions struggling to keep up now potentially face severe credit score declines that could impact housing, employment, and future borrowing capacity. 

If you have student loans, now is the time to plan ahead, explore your options, and protect your credit as best as possible. One effective strategy to consider is rent reporting – having your on-time rent payments reported to credit bureaus. This can add positive payment history to your credit report, potentially offsetting negative impacts from sudden loan challenges.