As the pandemic-era forbearance on federal student loans comes to an end, millions of borrowers are bracing for significant impacts on their credit scores. According to a report from the Federal Reserve Bank of New York, over nine million student loan borrowers could see substantial declines in their credit standings in early 2025. This is a stark contrast to the previous years when borrowers benefited from the forbearance that marked delinquent loans as current, leading to an increase in median credit scores. However, with the end of this relief, many borrowers may struggle to keep up with payments, resulting in lasting damage to their credit reports. The implications of lower credit scores are severe, including reduced credit limits, higher interest rates on new loans, and overall diminished access to credit. This situation echoes the past housing crisis, where financial instability led to a significant drop in credit scores nationwide.
Read the full article here.