Credit Scores Plunge as Student Loan Delinquencies Hit Record High

As of February, over 20% of federal student loan borrowers with current payments due are more than 90 days late, according to a TransUnion report. That equates to nearly 4 million individuals in serious delinquency.

Many borrowers, TransUnion notes, either lack the financial means, weren’t aware of the due payments, or made a conscious decision to not pay. The federal government is now resuming collections after a pandemic-related pause.

This marks the highest delinquency rate since tracking began, surpassing pre-pandemic levels and the 2012 peak. Serious delinquency is officially defined as 90 or more days overdue.

The figures only include borrowers who aren’t in deferment or forbearance. However, TransUnion believes the actual numbers may be even worse due to pending changes in loan status.

With protections from negative credit reporting expiring in October 2024, many borrowers could soon feel the full impact of missed payments.

Subprime borrowers are particularly vulnerable, with over 50% classified as seriously delinquent. Even those with strong credit histories are seeing dramatic drops in their credit scores due to defaults.

The financial consequences are severe—missed payments can lower credit scores by 63 to 171 points, making borrowing significantly more expensive for affected individuals.

Borrowers like Tyler Wickord embody the struggle. Working multiple jobs and barely managing expenses, he says the loan burden feels endless. “I had no idea how much this would cost me long-term,” he reflected.