(News Nation) – Some student loan borrowers face penalties for late payments on federal student loans.
If delinquency appears in credit reports for the first half of 2025, more than 9 million borrowers could face a significant drop in their credit scores. Federal Reserve Bank of New York.
After a pandemic-era suspension in September 2023 when federal student loan payments ended, the Biden administration provided borrowers 12 months “On-Lamp” The repayment plan protected borrowers from most outcomes of delaying payments. It ended in September 2024.
At the end of that repayment period, the New York Fed estimated that the volume of its past payments reached 15.6%, an overdue debt of over $250 billion.
The Fed's report said it would be reasonable to expect student loan delinquency to exceed pre-pandemic levels when new delinquency begins to reach credit reports.
The Fed said the new delinquency in student loans could reduce their credit scores by up to 150 points depending on what the borrower's previous score is. This could result in lower credit restrictions, higher interest rates on new loans, and lower overall credit access.
