The Wall Street Journal and other news outlets reported that student loan borrowers’ credit scores are dropping.
Here’s a look at the current situation:
Bad News: Credit scores of student loan borrowers have dropped
- Approximately 43% of federal student loan borrowers have not resumed payments, causing a drop in their credit scores and putting them on a default path.
- 200-point reductions: Borrowers are reporting drops of up to 200 points, with many borrowers seeing a 150-point drop after two months of missed payments.
- Two million borrowers are at risk of falling into sub-prime status: Credit scores range from 300 to 850. Scores between 580 and 669 are generally considered subprime and make it difficult to qualify for homeownership, auto loans, and other consumer loans.
Good News: Credit scores can be improved
Borrowers missed payments for many reasons. Some reported missed communication with servicers, some misunderstood income-driven repayment and forgiveness, and some couldn’t afford their payments and didn’t realize they had any options.
All of this is repairable. Here’s a friendly checklist if you’re one of the nine million borrowers not current on their payments:
- Double-Check Your Contact Information: Take a moment to log in to your servicer’s site and confirm your contact information is up-to-date. If you’re unsure who your servicer is, please connect with an IonTuition counselor.
- Explore Your Options: Review your current payment plan and if you’re uncomfortable making payments, talk to an IonTuition counselor about your options.
- Work with Your Servicer: Some borrowers may grant a one-time courtesy removal of the 90-day delinquency mark, but you’ll need to ask. IonTuition can help you contact your servicer.
IonTuition Uncomplicates Student Loan Repayment
The last five years have been a rollercoaster for student loan repayment, so we understand the confusion, fatigue, and frustration that borrowers feel. Most student loan repayment issues can be quickly solved by calling an IonTuition counselor. Don’t hesitate to reach out if you have questions.
Background on How This Happened:
After the three-year pandemic-era pause, federal student loan borrowers were given a 12-month “on-ramp” period to restart their payments. During the on-ramp, borrowers could avoid the negative consequences of missed payments, such as accrued interest or reporting to credit bureaus.
The on-ramp period ended on September 30, 2024. In January, borrowers who made no payments would have been three months behind having missed their October, November, and December payments. After three months, servicers can report delinquency to credit bureaus.
Reach out to IonTuition today to take control of your student loan repayment and your financial future!