Millions Of Americans Just Took A 100-Point Hit To Their Credit Score — And It Could Get Worse As Student Loan Collections Resume

Millions of Americans are witnessing a decline in their credit scores as the U.S. government recommences the collection of missed student loan payments.

What Happened: The U.S. Department of Education has restarted the process of collecting overdue student loans, a move that has led to a drop in credit scores for many borrowers. The Federal Reserve Bank of New York reports that in Q1 2025, credit scores for 2.2 million student loan borrowers fell by 100 points, with another 1 million experiencing drops of 150 points or more, reported the Associated Press.

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After 90 days of non-payment, student loan servicers report delinquent accounts to major credit bureaus, which then recalculate the borrower’s credit score.

This can have a severe impact on an individual’s credit rating, akin to filing for personal bankruptcy, making it more difficult and expensive for them to secure car loans, mortgages, credit cards, auto insurance, and other financial services.

Such sharp drops can determine whether credit card interest rates remain manageable or spiral out of control—and can even influence whether a rental application gets approved or denied.

Why It Matters: The resumption of student loan collections comes amidst concerns about the security and privacy of federal education systems managing trillions in student debt. Senator Elizabeth Warren has called for an investigation into the Department of Government Efficiency's (DOGE) alleged access to sensitive student loan data.

Moreover, the Trump administration’s student loan policies, backed by Congressional Republicans, could pose a significant risk to the U.S. economy, potentially overshadowing concerns about Trump's tariff policies. Experts warn that these policies could economically pressure millions of Americans, further impacting an already struggling economy.

Kevin King, Vice President of credit risk at LexisNexis, echoes the concern and expects the resumed student loan collections to start affecting the U.S. economy in the near future.

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