Posted Mar 20, 2025 by Martin Armstrong 

Millions of Americans believed that their student loans would be forgiven per the promises made under Biden Administration. Then there was a period of student loan forgiveness that began during the COVID era when countless people found themselves unemployed. Payments have resumed but 9.2 million (43% of federal loan borrowers) have fallen over 90 days behind on payments.

Instead of forgiveness, these delinquencies will remain on these borrower’s credit reports for seven years. Delinquencies show on all three major credit bureaus (TransUnion, Experian, and Equifax) through nationwide credit reporting agencies (NCRAs). The result is an immediate drop in credit scores of up to 250 points.

So over 9 million Americans experienced a massive downturn in their ability to borrow instantaneously. Many may not realize that one missed student loan payment can be counted as up to eight missed payments. Credit scores are calculated and weighted differently depending on where you look. FICO factors in payment history as 35% of one’s overall credit score, while VantageScore factors in missed payments as 40% of creditworthiness.

Student loan payments have not appeared on credit reports for the past five years. Those who are able to meet their loan obligation will see a positive uptick in their score. VantageScore reported that they believe 2.3 million borrowers will see their credit rating fall beneath 600 once these payments reappear on consumer credit files. These people will have an extreme difficulty obtaining new loans.

Thanks to the Clinton Administration repealing Glass Steagall, student loans may not be discharged in the event of bankruptcy. Default and the entire balance is due immediately, with an addition of up to 25% of the loan balance in collection fees. The government may withhold Social Security benefits and tax refunds and will repeal any federal financial aid. Certain professional licenses could be suspended. Defaulting makes it hard for borrowers to access forbearance, deferment, and other repayment options. On top of everything, the government can begin to garnish wages WITHOUT a court order.