Posted on 04/12/2025 7:52:18 PM PDT by SeekAndFind
Millions of student loan borrowers are expected to see their credit scores drop by summertime, reversing progress made under pandemic-era protections that lifted credit scores but expired last year.
New York Fed research released Wednesday found that over 9 million borrowers with past-due balances could see "significant" decreases in their credit scores. The warning comes after many student loan borrowers' credit scores increased during the period of federal student loan forbearance, which temporarily suspended payment requirements and interest during the COVID-19 crisis. The typical borrower's score jumped 11 points in 2020, rising from 662 to 673.
Because late payments so heavily hurt credit scores, the gains were much larger for people who had defaulted or delinquent student loans in 2019, according to the researchers. Borrowers with delinquent loans had a typical credit score increase of 74 points in 2020; the median score increased from 501 to 575.
In 2022, borrowers with student loans in default status were able to improve their credit under the "Fresh Start" program, which extended a one-time opportunity for those borrowers to get back in good standing. Median credit scores for borrowers with defaulted loans increased from 564 in the first quarter of 2022 to 608 in the first quarter of 2023.
These improvements are now at risk of being undone, as late payments are starting to show up on credit reports again.
Student loan payment requirements were paused between March 2020 and August 2023, with payments restarting that fall. During a one year "on-ramp" period that ended this past September, federal student loan borrowers' credit scores were protected from the negative credit reporting consequences of missed loan payments.
By 2024, "borrowers with loans in delinquency or in default saw scores that were 103 and 72 points higher, respectively, than at the end of 2019," the report said.
But with the protections gone, defaulted and delinquent debt now appears on borrowers' credit reports.
What's the difference between delinquency and default? Delinquent loans over 90 days past due will be reported to the credit bureaus by the loan servicers. Student loan defaults typically occur after 270 days.
For borrowers behind on their loans, student loan delinquency could mean reduced access to credit and higher interest rates: A new student loan delinquency can often tank a credit score by more than 150 points, the New York Fed researchers wrote. And in addition to the ding to your score, delinquencies typically stay on your credit report for seven years.
Yet banks, corporations and our own government borrow money, never pay back at all, and their scores never go down
“… federal student loan borrowers’ credit scores were protected from the negative credit reporting…”
That’s OK. NINJA loans didn’t really work out anyway.
Isn’t debt forgiveness the same as taxable income? If these freeloaders did not report this debt forgiveness, then they should get hit with heavy IRS penalties.
What they could get from the IRS and State are 1099 Forms showing that money as income and they will pay taxes it. There is no free ride.
Well reality is about to slap the crap out of many people...Should have gone to Trade School instead but they wanted that party life...
I worked my way through part of college. Eventually, between undergraduate and graduate school, I owed about $30,000. It took awhile to pay it back. In the lean years, I called them when it was a struggle. They didn’t like that I could not always pay the full, monthly amount, but they definitely appreciated me not just ignoring them.
El Rush-Bo always said find what you love, and make a career out of it. Rush knew early on that he was born to be on the radio, and we were all born to listen.
When I was in the 7th grade, I knew I wanted to teach Spanish. Yes, this Irish Catholic gringo fell in love with the Spanish language. I devoured it. In 4 years of high school, I took 5 years of Spanish. For years I worked, saved money, and attended college when possible. I eventually saved up enough and went to college in Spain.
Life has its ups and downs, but I kept moving forward.
Besides teaching Spanish, some years I taught GED in Spanish. I always loved math, and got to teach Middle School math for a few years.
When I made the final college loan payment, it felt incredible. For decades after, we only use credit for larger purposes. If we desire a couch, a dishwasher, etc, we wait until we can pay for the whole thing, instead of a credit card. Sometimes, by the time you save up enough money, you find that you really didn’t need/want what you were saving for.
For those who aren’t paying SOMETHING monthly, you reap what you sow. Get a job, any job, and start making monthly payments. It feels way better than victimhood.
These debts are not going to be repaid. There is no sense in piling on tax liabilities, which won't be paid either.
Bankruptcy is supposed to settle this kind of thing. But the student loans are specifically excluded from this remedy. That needs to change. And adding tax liabilities to bankruptcy settlements is just stupid. It defeats the entire purpose of bankruptcy.
There is no good that comes from holding people as indentured servants to banks and the IRS for the rest of their lives. That is why we have bankruptcy laws in the first place.
We should not be making any more student loans either. They are a bad investment.
RE: El Rush-Bo always said find what you love, and make a career out of it.
Once he said as she served a nice supper “Oh, another meal from the freezer?”
She said: “Bill, you have a big mouth. If you ever find some way to make money from it you will someday be a rich man.”
“Neither a borrower nor a lender be.”
Spoken by Polonius in Act 1 Scene 3 of Hamlet.
They signed the loan Docs and in many cases they had Parent co-signers. They all need to suck it up.
Right. A grandpa in my neighborhood got stuck with his grandson’s college loans when he reneged. The grandson is now cut out of the will.
There is much good that comes from that. It serves as an example to prevent others from making the same mistake.
😁
Fantastic! Welcome to the real world! Here in the real world, we have to pay our bills.
Simple...pay off your loans that you signed for. I do not want to pay a penny of YOUR loans.
the way to raise your credit score is to honor your debts
on a timely basis
it is really quite simple
(and it would be wise for students to only take out loans if they will be able to repay them. this usually means taking courses that can make you some money. Not so much Ancient Transgender Poetry in Khazakstan. Not so much The Art History of Satan and his Concubines. Not so much Marxist Societal Uprisings Practicum. Try some Computer, Engineering, Science, Nursing, Medicine, Auto Technology, building trades, or? Just a word to the wise. It is all so very very easy.
Nope.
In small doses, a hard demand for loan repayment has exactly the beneficial effects that you want. It serves as an instruction (Don't be "that guy"). But in large doses in is destructive, and the harm outweighs the benefits.
We have too many people who were snared in the student loan trap. And the trap was set by the Universities in cooperation with the government. The Universities were the beneficiaries of the harvest. It was essentially a fraud.
We have roughly 9 million former students who were foolish enough to get trapped in student loan debt. Some are earnestly paying off their loans, some are deadbeats, some are fools, and some are just stupid.
Regardless of classification, about five million of those people will never be able to pay off their loans. That is too many people to hold in indentured servitude for the rest of their lives as a result of a swindle.
Take the repayments out of the University endowment funds if there are any left. The Universities were the ones selling worthless degree programs to teenagers who had no experience to make correct estimates of the degree value.
What must be coupled with bankruptcy settlements is to stop making any more student loans.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.