Millions of Americans are suddenly facing dramatically lower credit scores from delinquent student loans, making it tougher for them to secure housing, insurance, car loans, even employment at a vulnerable time for the U.S. economy.
Credit scores dipped by more than 100 points for 2.2 million delinquent student loan borrowers, and 150 points or more for more than 1 million in the first three months of 2025, according to an analysis by the Federal Reserve Bank of New York. It's the kind of credit score drop that follows a personal bankruptcy filing. Roughly 2.4 million of those Americans previously had favorable credit scores and would have qualified for car loans, mortgages or credit cards before these delinquencies were reported, researchers said.
Tina Johnson was two days away from finalizing the purchase of a used Nissan Pathfinder when she got notice that her preapproved loan was no longer valid. Her credit score had fallen from 650 to 418 after she missed $440 worth of student loan payments that she didn't realize were required again. Although the Department of Education said lenders would send borrowers a bill at least three weeks before it was due, Johnson said she was never notified that payments needed to resume.
"Nothing, no email, no phone call, no letter — I could've avoided all this if I had known," said Johnson, 44, who lives in Fleming County, Kentucky.
Johnson's expected car payment of $350 a month nearly doubled overnight, making it unaffordable for the DoorDash delivery driver. She's stuck with her 12-year-old Nissan Altima for now. Johnson says she's also putting off other plans, including borrowing against her home to repair her roof and going back to school for a bachelor's degree, because of the sudden hit to her credit score.
"I took care of the accounts, but there's nothing else I can do," she said. "It'll take me years to get those 200 points back."