Hey, let’s talk. If your credit score just took a nosedive and you’re wondering what the heck happened, you’re not alone. Millions of Americans are in the same boat, and unfortunately, it’s tied to student loans coming back to bite.
Here’s the deal: after years of pandemic-related relief, the government has officially hit play on federal student loan collections. And it’s not going quietly—miss a payment for 90 days, and boom, you’re reported as delinquent to the credit bureaus. That one update can slam your score down faster than you can say “interest rate.”
From relief to reality: Collections are back
Remember the pause on student loan payments that started back in 2020? Yeah, that was nice while it lasted. Payments technically resumed in 2023, but there was a one-year “on-ramp” grace period. That ended in October 2024. And now, with the Trump administration picking up collections again, borrowers are finding their wages and even tax refunds at risk.
What’s worse? According to the Federal Reserve Bank of New York, 2.2 million people lost 100 points or more on their credit scores in just the first three months of 2025. Another 1 million saw their scores drop by at least 150 points. That’s the difference between getting a decent credit card and not being approved to rent a studio apartment.
Real people, real problems
Kat Hanchon in Detroit saw her score drop below 600—considered subprime—after her loans went past due. Her new payment? $358 a month. Her response? “I’m not going to be able to pay that.” And honestly, who could blame her when medical bills and basic living costs are already towering?
Then there’s Dom Holmes in Pennsylvania. He didn’t even know he was behind—never got a notice. Woke up to a 70-point drop. Now he’s worried about finding housing for a potential job move. And let’s not forget Andrew McCall, a 58-year-old with $30K in loans left and no way to make the payments. His credit score, like many others, feels like a financial prison sentence.
Why it matters more than ever
Look, your credit score isn’t just a number. It’s the gatekeeper for car loans, credit cards, mortgages—even your job in some cases. A lower score means higher interest rates, more rejections, and fewer options. And with inflation and layoffs already making life hard, it’s just salt in the wound.
Plus, the Education Department hasn’t made things easier. Some borrowers never got a bill; others faced long call wait times or no guidance at all. Add that to confusion around loan forgiveness programs, and you’ve got a perfect storm of financial chaos.
So, what can you do?
First, check your loan status right now. Log in to your loan servicer’s website or visit studentaid.gov. If you’re struggling, apply for an income-driven repayment plan (IDR)—it could drastically reduce your monthly bill.
Second, monitor your credit report and file a dispute if something looks wrong. And if your score already took a hit? Know this: you can rebuild it—but it’s going to take time, on-time payments, and a lot of patience.
The bottom line? Student loan collections are back, and they’re impacting credit scores in a big way. But being informed and proactive can help soften the blow. Let’s navigate this mess together.
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