Trump administration appeals Student loan payments Earlier this month, it negatively affects the credit records of many borrowers.
The credit grades decreased by more than 100 points compared to 2.2 million borrowers from the loans of students from January to March from 2025, according to what I mentioned recently. Data From the Federal Reserve in New York. As for his report, the Federal Reserve looked at the borrower’s delinquency rate based on the shares of student loan borrowers with at least one student loan that was reported that it is due or in the failure to pay.
Another 1 million borrowers have seen a decrease in credit degree at least 150 points during the first three months of 2025. The low credit degree makes future loans more difficult and more expensive, and paying features such as buying a house, savings to retirement, or more of reach. It can even affect employment prospects.
“The main risks are that this can lead to a decrease in credit limits and higher interest rates for new loans, which may reduce the arrival of late borrowers to credit, which will then be used in other areas of spending such as cars and mortgages,” said Grace Zewler, Economists in Oxford Economic.
Researchers said that about 2.4 million newly late borrowers have credit grades exceeding 620, which are good, and they would allow them to qualify for new loans for cars, mortgages and credit cards before reporting the hole.
“These borrowers have seen significant declines in their credit place in the first quarter and will now face more severe borrowing costs or denial to obtain new credit,” said researchers in the report.
The permission period ends
Paying student loans They were stopped At the beginning of the Covid-19 pandemic by President Trump in March 2020, during his first term. After multiple extensions of payment by former President Biden, he resumed payment in October 2023.
Then the US Department of Education put a period of “on the ramp” for a period of 12 months, which expired in October 2024, to give borrower students some leniency when resuming payments. During the transition period, loan employees did not report last payments or late credit offices, and to protect many students from students from the worst consequences of not paying their payments. Bayers are late for their loans when the payment is delayed by more than 90 days.
The stoppage to the era of the epidemic was a positive impact on the credit levels of the borrowers: between 2019 and 2024, the number of borrowers with credit grades less than 620 decreased by more than 4 million, as borrowers moved to the upper credit scores, and an Oxford’s economic analysis shows.
With this allowing period It ended on May 5Student credit grades are also photographed from students, as their failures are reported to pay their debts to credit offices.
“Borrowers who receive a new delinquency will witness a decrease in their credit degree. This may indicate a reflection of the positive credit degree that was seen during the epidemic, which will lead to a decrease in the limits of credit and higher interest rates for new loans,” Oxford researchers wrote in a report.
Long -term consequences
Significant declines in students’ late credit grades will have long -term repercussions for the affected people, including low credit limits, higher interest rates for new and limited credit accessories in general, according to experts.
“The long -term problem is that they will face a problem in reaching other types of loans in the future, such as mortgage loans and car loans. It is easier to build credit grades when you do not have negative data, but when you have delinquency, it is difficult to get out of it. It takes a lot of effort.”
Bagaman said that consumers with multiple adjustments benefit that they are forced to pay “high benefits” on larger loans as soon as delinquency affects their credit degree.
“They should pay more on their household loans and the cost of these credit lines affects the income they left after meeting their basic needs,” he said. “The ability to re -financing existing loans with a low -cost credit degree can be expensive, and at this point, borrowers are almost left outside the financial system.”
Bagaman added that through this it means that they cannot achieve features such as having a house or getting other assets, “and this is not a good situation of existence.”
The American dream is increasing from view
Zweimer, from Oxford Economics, noted that delinquency remains on a seven -year credit report, so avoiding being affected by the loan in the first place is the best path of work. If millions of borrowers decrease in low credit levels, this may exacerbate the gap between Americans with low and high -income Americans.
“The older parts and low income of the population will be affected, so we will look forward to knowing if there is an additional complexion for American consumers,” said Zwimler.
“With the decrease in their credit scores, those who cannot withstand the costs of high borrowing costs will rise.
“Young people in the American dream of buying a house and providing retirement are backward,” Akraman told CBS Moneywatch. “Their payments rise – and the more students’ loans, the less they are in the direction of other things. ”
