How the resumption of student loan delinquency reporting may impact FICO Scores

Following the pandemic-era federal student loan forbearance period, federal student loan payments resumed in October 2023. Prior to this, in June 2023, the Department of Education established a yearlong on-ramp period for the resumption of payments, meaning missed payments on federal student loans would not be reported to the consumer reporting agencies (CRAs) in the first year after payments restarted.

The on-ramp period ended in late September; however, federal student loan delinquencies will not be reported to the CRAs until they are 90 days past due, which means that new student loan delinquencies are unlikely to appear on credit reports until January 2025. Combined with the federal student loan payment pause, this means that delinquencies on federal student loans will be reported to the CRAs for the first time since March 2020. Given the potential impact of this change, it is important for consumers to fully understand the implications for their credit scores.

How many borrowers will be impacted?

FICO conducted an analysis to estimate the number of borrowers likely to miss student loan payments after the on-ramp period ends and therefore likely to be impacted with the upcoming reporting of student loan delinquencies on their credit reports. Utilizing a baseline sample of over 10 million consumer credit files, we found that of the ~18 million consumers with a scheduled federal student loan payment of more than $0 as of October 2024, some 5 million consumers have not made any payments since the end of the pandemic-era federal student loan forbearance. Therefore, a significant number of consumers are at risk of having a delinquency reported to their credit files if they do not resume making their required payments.

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How will the end of the on-ramp impact FICO Scores?

Payment history is the most important category of the FICO Score calculation (35%), and the recency and severity of delinquency are key factors in this most important category. Accordingly, FICO Scores for the population of borrowers with student loan delinquencies could see significant impacts if they do not resume making their payments as required.

The precise impact will vary across the spectrum of borrowers. Those with higher scores are likely to experience the greatest impact to their score from a new 90+ day delinquency being reported, while those with lower FICO Scores will likely see a smaller impact.

What can consumers do to avoid negative impacts to their scores?

To help avoid potential negative impacts to their credit score, consumers are encouraged to make their student loan payments as required by their lender, even if this means reallocating their budget to do so. Consumers can find more free educational resources on what impacts their FICO® Score, and how to improve or maintain their credit score at myfico.com.

There are other impacts of not making federal student loan payments. If consumers don't make timely payments, they run the risk of potentially having funds taken from their wages, tax refunds, or other government payments. Additionally, this could lead to debts being referred to third-party debt collection agencies.

To avoid this, consumers should do their research now, including working with their student loan servicers to discuss their situations and understand their options, such as an income driven repayment plan, to see if they may qualify for lower payments or $0 payments.