The recent rise in federal student loan delinquencies is significantly impacting the national average credit score, which dropped to 715 in February. This decline is largely attributed to the resumption of student loan payments after a long pause during the pandemic, which had allowed borrowers to avoid negative credit reporting. As of February, 2.7 million borrowers reported new late payments, a trend that is expected to worsen as an additional 5.4 million borrowers may fall into delinquency in the coming months. The ramifications of these delinquencies are severe, with individual credit scores potentially dropping by as much as 171 points for those with previously high scores. The financial strain on borrowers is exacerbated by rising inflation, which has eroded the financial cushion that many relied on during the payment pause. Experts warn that the damage to credit scores from these delinquencies can last for seven years, creating long-term financial challenges for millions of Americans.
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