How much do missing student loan payments hurt your credit score?

A US freeze on federal student loan repayments during the COVID-19 pandemic has provided vital financial relief for millions of Americans. But borrowers could soon be on the hook again, with the moratorium set at lapse at the end of the month.

More than 79% of those with student debt — a total of 30 million people — saw their credit rating improve during the pandemic, according to a report this week from the Federal Reserve Bank of New York. Nearly 8 million borrowers improved their scores enough to upgrade to a higher credit tier.

“The pandemic repayment pause has significantly reduced delinquencies and defaults on student loans, so we’ve seen an increase in credit scores across the student debtor breakdown,” said Marshall Steinbaum, senior funding researcher at the higher education at the Jain Family Institute. “Credit scores for student debtors increased in all areas, but increased the most for the less well-off student debtors.”

The Biden administration has yet to make a final decision on whether to cancel student debt for nearly 40 million Americans. Meanwhile, missing payments or defaulting on your student loan can have significant financial consequences.

“Generally, student debt weighs on the financial well-being of many households and prevents them from being solvent and all that entails,” Steinbaum added.

How your credit score is determined

Your credit score, which tells a lender how likely you are to repay or miss a debt, is calculated largely based on your payment history. Other factors, like how much you owe on car loans and credit cards and the length of your credit history, also affect your score. The types of accounts you hold and your recent credit activity make up the rest of your score.

Generally speaking, here is how your credit score is calculated:

  • Payment history (35%)
  • Amounts due (30%)
  • Length of credit history (15%)
  • Types of credit accounts (10%)
  • New credit (10%)

So what if the federal student loan forbearance period ends and you are unable to make payments? The harsh reality is that missed payments will hurt your credit score. What is less simple is how much.

“That’s the impossible question. There is no fixed number of points for an event on a credit report,” said John Ulzheimer, a credit expert who has worked at Equifax and FICO, two of the largest credit scorers.

If your credit report is clean, just one late payment can significantly lower your score.

“If you have fantastic credit and all of a sudden you start missing payments, the impact will be more dramatic than if you already had bad credit and you start missing student loan payments,” he said. said Ulzheimer.

Having debt is safe for your creditworthiness as long as you make your payments on time and don’t default on the loan.

“It’s really a problem of defaults and missing payments when you start having a lot of problems,” he said.

Rising interest rates on federal student loans make borrowing college money more expensive;


Credit scores generally range from 300 to 850, with scores of 670 and above considered good to excellent. The average FICO score in the United States was 714 in 2021, according to Experian.

According to Ted Rossman, a credit expert at, even a single late payment can seriously tarnish an otherwise solid credit score, reducing it by up to 100 points. On the other hand, if your payment history has been inconsistent before, one or two missed payments will have less of an impact.

“If you already have a bunch of late payments and you have a lot of debt, one more late payment won’t hurt as much as someone with a clean credit score,” Rossman said.

Unsurprisingly, defaulting on a student loan will generally cause more damage.

“It could easily take 150 or more points off your score. You want to avoid it coming to that,” he said.

A bad credit score can make it difficult to rent or buy a house, buy or lease a car, get a cell phone plan, or even subscribe to utilities like electricity. electricity and gas. Some employers even check applicants’ credit history.

“Your credit score is one of the most important numbers in your financial life,” Rossman said. “This will go a long way in determining whether or not you are approved for loans and lines of credit.

The worst thing you can do is do nothing

Ignoring delinquent student loan payments is never wise.

“If you have any issues outside of the current forbearance, you definitely want to talk about it,” Rossman said. “There are options – your lender can work with you. The worst thing you can do is do nothing.”

For example, you can apply for an income-tested repayment plan or consolidate your loans into a private plan. Under an income-driven repayment plan, your monthly payment is set at a rate that’s affordable to you based on your income, usually around 10-15% of your discretionary income.

Here’s what’s not an option: filing for personal bankruptcy, which is prohibited by law.

“Federally guaranteed student loans aren’t legally dischargeable, so that’s not really an option. Similar to things like child support, you can’t discharge those kinds of things in the event of a bankruptcy,” Ulzheimer said.

But there are workarounds. For example, you can use the equity in your home or a personal loan to first pay off your student debt, then declare bankruptcy and have other loans forgiven.