Here’s How Student Loan Debt Impacts Your Credit Score
Credit: SolStock / E+ / Getty Images- Since February, a growing number of borrowers have seen over 100-point drops in their credit scores associated with student loan debt.
- For the most part, this is because of the expiration of Biden’s 12-month moratorium on reporting loan defaults.
- Some borrowers whose loan debt was forgiven in the last few years still saw alarming drops.
- One expert says spotty communication from loan servicers may be causing confusion among borrowers.
Are you a federal student loan borrower who has seen your credit score go down in 2025? You’re not alone.
Credit scores for federal student loan borrowers appear to be declining after a Biden-era 12-month moratorium on reporting loan defaults to credit bureaus expired Jan 1. And with the Trump administration announcing that it will resume collections on defaulted student loans starting May 5, borrowers may be looking at even greater hits to their credit.
As early as February, borrowers began to notice more than 100-point drops on their credit reports, and these drops have been so significant that the national average FICO score has fallen by one point in just three months.
While some of these borrowers are among the 5.3 million Americans whose student loan debt is currently in default, others who have had their loans forgiven are still seeing alarming drops in their credit scores this spring.
In fact, some borrowers only learned that their loans were delinquent or in default when they saw significant drops in their credit scores.
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“[There’s been] a sort of the spotty track record of federal loan servicers communicating these things to borrowers [over the last five years],” Bankrate consumer lending analyst Andrew Pentis told BestColleges. “On top of that, you add in the layer of all this news around the Department of Education (ED) essentially being dismantled or hollowed out. Given the severe reduction in staff, there are fewer folks to process complaints and hear out borrowers right now.”
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If you’re a borrower worried about impacts on your credit score, here’s what you need to know.
How Student Loans Affect Your Credit Score
Just like any other loan, your payment history on federal student loans accounts for 35% of your overall FICO score. This means that if you pay your loan on time, you get credit for that, and your credit score will ultimately rise.
This is particularly important if you’re looking to refinance your student loans later on or qualify for other types of loans. A higher credit score can help you qualify for a lower interest rate.
Conversely, if your loan falls into default — if you make no payments for more than 270 days — your credit score will drop severely, which can make you ineligible for refinancing down the line.
Looking for more info on federal financial aid? Read More:
Can You Dispute Student Loan Debt From Your Credit Report?
The short answer, according to Pentis, is maybe. This depends on whether or not there are factual errors in the debt being reported to the three credit bureaus.
But it’s unlikely this will solve the issue for borrowers who are currently seeking a quick solution to re-boost their credit scores after recent drops.
“There are absolutely tips, tricks, even loopholes with student loan repayment, but none that I’m aware of in terms of fixing your credit overnight,” said Pentis. “If something is true [and] verified, such as, you owe student loan [debt] and perhaps you’re delinquent on it, your credit bureau is not obligated and has no motivation to remove that account from your credit report.”
Expert Advice:
Borrowers alarmed by a drop in their credit score should prioritize communicating with their loan servicer over quick forgiveness fads that may not work, says Pentis. This is easier said than done, he recognizes, but Pentis stresses that your loan servicer will have the best insight into the state of your loans and why they’re impacting your credit.
He also recommends that borrowers create digital or hard copy files of their federal loan history in addition to their private student loan history.
“Having sort of a record of where you stand with your student loan debt, particularly if you’re on the precipice of student loan forgiveness, perhaps through public service loan forgiveness (PSLF) [is important].”
Does Student Loan Forgiveness Affect Your Credit Score?
Student loan forgiveness can temporarily affect your credit score; however, Pentis says the long-term benefits far outweigh the short-term drop you’ll likely see.
“You know, if we use an example of a borrower who has $20,000 worth of [student loan debt forgiven], they should be in a much better position now to handle other existing debt or to just manage their finances more effectively because they no longer have that onerous account that’s been perhaps burdensome.”
“Continuing to make on-time payments toward other debt is a great way to make sure that [your] credit score will go back on the rise,” he says.
Does Student Loan Debt in Forbearance Affect Your Credit?
According to Experian, federal student loans in forbearance should not negatively impact your credit score. This is because student loan forbearance provisions are typically woven into your original loan agreement. So, your credit should remain in good standing while your loan is under forbearance.