In a move that resumed after a five-year pause, the federal government began reporting student loan borrowers who fail to make payments. This has resulted in millions of borrowers experiencing sharp declines in their credit scores, with loan servicers indicating that up to four million have been marked late already. The Federal Reserve Bank of New York predicts this figure will exceed nine million by mid-year. Such financial distress poses broader economic risks, impacting borrowers' ability to secure housing or affordable loans, and potentially contributing to an economic slowdown.
After a five-year pause on penalizing borrowers for not making student loan payments, the federal government has begun reporting late payments to credit bureaus.
Millions of borrowers, particularly those under financial distress, are facing a significant drop in their credit scores due to overdue student loan payments at the start of this year.
Loan servicers warn that this year, around four million borrowers have been reported late, with projections suggesting this could climb beyond nine million.
Preston Cooper, an economist, highlighted that low credit scores from student loan delinquencies could prevent individuals from renting or purchasing homes, exacerbating economic issues.
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