The U.S. government resumed reporting missed student loan payments to major credit bureaus which led millions of Americans to experience credit score declines after the pandemic leniency period ended.
The current policy defines borrowers who miss payments for more than 90 days as delinquent which leads to credit agency reports that cause major damage to their credit ratings. The credit score reduction reaches levels that match those of bankruptcy cases for certain individuals.
The Federal Reserve Bank of New York reported that 2.2 million borrowers experienced a 100-point credit score decrease during the first quarter of 2025 while 1 million borrowers saw their scores drop by 150 points or more.
The Education Department implemented a payment halt for federal student loans in March 2020 to provide economic assistance during the COVID-19 pandemic. The payment moratorium has ended and servicers have started enforcing payments even though high inflation and rising interest rates and job market uncertainty continue to affect the economy.
A reduced credit score creates obstacles for people to obtain loans and credit cards and mortgages and auto insurance while making their household finances more challenging to manage.
The return of collections demonstrates how American consumers especially young borrowers face financial difficulties during the unstable post-pandemic economic recovery.
