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Student Loan Collections’ Return Could Impact Credit Scores for Millions
March 7, 2025
For the first time since the pandemic, missed student loan payments will start hurting your credit again, and millions of borrowers could see their scores plummet or even have their wages garnished.
According to a new report from VantageScore, roughly 9 million borrowers who are behind on payments could see their credit scores drop by as much as 129 points as the U.S. Department of Education resumes collection activity.
This marks a significant change, as collection efforts were suspended during the pandemic, providing temporary relief for borrowers. However, that relief officially ended on September 30, 2024. Now, with collection efforts ramping up, missed payments can also result in wage garnishment and loss of retirement benefits.
On the flip side, borrowers who stay current on their student loan payments could see a boost in their credit scores, potentially rising by up to eight points.
As of now, about 43% of federal student loan borrowers, or roughly 9.2 million people, are behind on their payments. These delinquencies will begin showing up on credit reports between now and May, which could have wide-reaching financial consequences for many borrowers.
Starting in October 2025, those in default may also face wage garnishment, per a recent memo from the U.S. Department of Education.
With credit scores typically ranging from 300 to 850, and scores above 670 considered good, this new development is a wake-up call for borrowers to stay on top of their payments and avoid long-term financial consequences.
