Student Loans Affect on Credit: As spring and summer bring more people into the housing market, a new problem is quietly making things harder for many future homeowners. It’s not about high home prices or rising interest rates. This time, student loan payments are creating serious trouble, especially for people who want to buy a home in 2025.
When the federal government paused student loan payments in 2020 because of the pandemic, borrowers got a much-needed break. But that pause ended in September 2023. Now, millions of people are behind on payments, and their credit scores are dropping fast.
The Federal Reserve Bank of New York says nearly 10 million borrowers are behind on their student loans in 2025. Some people have seen their credit scores fall by more than 150 points, making it much harder to get a mortgage.
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A drop like that can turn someone with good credit into a risky borrower. If your score was 760, a hit of 170 points could bring you down to 590. That might be too low to get a regular mortgage. In that case, your only option could be an FHA loan, which comes with more rules, bigger down payments, and extra fees.
$0 payments for borrowers making minimum wage.
Loan payments cut in half for undergrads.
An end to runaway interest.As @SecCardona shares, the new SAVE Plan makes student loan repayment more affordable than ever before.
➡️ https://t.co/rxV9bvoyMd ⬅️ pic.twitter.com/BsIPpY8bLp
— U.S. Department of Education (@usedgov) September 13, 2023
Student Loans Affect on Credit: Why People Are Falling Behind on Student Loans
Many borrowers are struggling because they weren’t ready when payments started again. Some thought their loans were still on hold. Others didn’t know about changes in loan companies or didn’t get the right notices. If a borrower doesn’t make a payment for 90 days, the loan company has to report that to credit bureaus. That’s when the trouble really begins.
Martin Lynch, who leads the Financial Counseling Association of America, explained how bad things can get.
He said, “If a student loan delinquency hits your credit file, especially for those with high credit scores, it can lead to a significant drop sometimes up to 170 points.” That kind of drop can block you from buying a home or force you to pay more every month because of higher mortgage interest rates.
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What You Can Do to Protect Your Credit
If you’re unsure about your student loan status, visit studentaid.gov to check your payment history and loan servicer. Make sure your contact info is current, so you don’t miss updates.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, said, “If you’ve missed payments, don’t wait. Contact your servicer and ask about options to bring your account current.” After 270 days of missed payments, loans go into default, which can lead to lost tax refunds or wage garnishment.
Some borrowers may qualify for forbearance or deferment. Andrew Lokenauth, a Florida credit counselor, said, “Getting your loans back in good standing can demonstrate to lenders that you’re managing your debt responsibly.”
