May 14, 2025 1:19pm CDT

Student loan payment delinquencies began appearing on credit reports for the first time in 43 months this year – and it’s having a significant impact on credit scores for millions of borrowers. 

"The ramifications of student loan delinquency are severe," the Federal Bank of New York said in a recent blog post. 

The U.S. Department of Education and the U.S. Treasury began collections for defaulted loans in May, actions that could include garnished wages, tax returns and Social Security payments.

And with millions of credit scores dropping, the Federal Reserve Bank of New York is also monitoring whether those delinquent student loan payments could spill over to defaults on auto loans, mortgages and other credit products. 

The backstory:

According to the Federal Reserve Bank of New York, student loan payments were paused for 43 months from the start of the pandemic in 2020 through September 2023. When payments resumed, the government gave borrowers one year of reprieve before missed payments would be reported to credit bureaus. That one-year on-ramp expired in October 2024 – and delinquencies were back on credit reports during the first quarter of 2025. 

Big picture view:

The Fed notes that in any given quarter, a large number of student loan borrowers aren’t required to make payments, so they can’t be considered delinquent. Those borrowers include people in deferment, forbearance, those currently enrolled in school, or people enrolled in a repayment plan that brings their monthly payment down to $0. 

At the end of the first quarter, more than 20 million borrowers were not in repayment, with another 5 million having a $0 monthly payment. 

By the numbers:

For those who are required to repay their loans, nearly 6 million borrowers, or 13.7%, had a loan 90 or more days past due or in default during the first quarter, the Fed says. Before the pandemic, that number was 14.4%.

At least 1 in 4 borrowers over the age of 40 were more than 90 days past due on their payments in the first quarter of this year. 

Nearly 1 in 4 student loan borrowers (23.7%) were behind on their payments – but less than 90 days behind – during the first quarter of 2025. 

Dig deeper:

According to the Fed, more than half of the newly delinquent borrowers already had subprime credit scores, which means the new student loan marks on their credit report are unlikely to make much difference. But 2.4 million of the newly delinquent had scores of more than 620, "and many would have qualified for new auto, mortgage, and credit cards before these delinquencies were reported," the Fed says.  

More than 2.2 million borrowers who were newly delinquent this year saw their credit scores drop more than 100 points. Of those, more than 1 million saw their credit scores drop by at least 150 points. 

Local perspective:

The Fed of New York says seven states have more than 30% of student loan borrowers showing as delinquent:

Local perspective:

Five states have delinquency rates below 15%: 

The Source: This report includes information from the Federal Reserve Bank of New York and previous LiveNow from FOX reporting. 

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