Student Loan Collections Cause Massive Credit Score Drops

Millions of Americans are seeing sharp declines in their credit scores as federal student loan collections resumed after a pandemic pause. The Federal Reserve Bank of New York reported that 2.2 million borrowers experienced a 100-point drop and another 1 million saw decreases of 150 points or more in early 2025. The Biden administration ended a one-year grace period in October 2024, after which the Trump administration implemented aggressive collection tactics such as wage and tax refund seizures for those still in default. These credit score drops are making it harder for borrowers to access loans, mortgages, rental housing, and even auto insurance, with effects similar to bankruptcy. Experts recommend borrowers check their credit and consult loan servicers for relief options like forbearance or payment backdating. Many face prolonged financial setbacks, delaying major purchases and milestones as they work to recover their credit.