New York (AP) – Millions of Americans see that their credit ratings now suffer that the US government has resumed the reference missed student loan payments for debt collection.
After 90 days of non-payment, student loan officers declare delinquent or past accounts, major credit offices, which use information to recalculate the borrower’s score. POST Payments of loans can therefore affect the credit rating of a person as severely as the deposit of personal bankruptcy.
A Credit score Call Make more difficult or more expensive to obtain car loans, mortgages, credit cards, automotive insurance and other financial services at a time when inflation, high interest rates and layoffs have set the resources of certain consumers.
The Federal Reserve Bank of New York said that during the first three months of 2025, 2.2 million Beneficiaries of student loans saw their scores drop by 100 points, and an additional 1 million had a drop of 150 or more points.
Refuses that the stiffness can make the difference between an interest rate of manageable credit card and an unmanageable interest rate, or the approval or the rejection of a request to rent an apartment.
THE American Department of Education The federal payments of stretching student loans in March 2020, offering rescue borrowers during the economic chaos of the coronavirus pandemic.
Although payments technically resumed in 2023, the Biden administration provided a period of one year that ended in October 2024. Last month, the Trump administration restarted the collection process For exceptional student loans, with plans To grab wages And tax reimbursements if loans continue to remain unpaid.
According to the Federal Reserve Bank of New York, around 1 in 4 people with student loan accounts was more than 90 days behind payments at the end of March.
Kat Hanchon, 33, who works in marketing and higher education in Detroit, was one. Hanchon said his score had dropped 57 points following the fall of his loans this year. This put its score below 600, or subprime.
When Hanchon obtained his declaration from his loan agent, his expected monthly payments were higher than before the break of the era of the pandemic, even if she had registered in A reimbursement plan This takes into account the total financial situation of a borrower.
“They said I had to pay $ 358 a month,” she said. “I will not be able to pay for this. … but I am not unusual in the world in which we live at the moment. ”
Hanchon said she had to prioritize the payment of medical expenses – for a dental crown, a radicular channel and an endoscopy – before being able to consider putting money on loans. Although her housing situation is sure for the moment, she is concerned about the annual percentage rate for her fluctuating credit cards.
Landers, owners, credit card companies, employers and public service companies all turn to consumer credit scores to assess the probability that borrowers can make regular payments. A higher score generally results in a drop in interest rates and more favorable loan conditions, while a lower score makes credit access more difficult.
The Department of Education said that borrowers should receive invoices from lenders three weeks before payments were due, but some people have indicated that they had not been informed.
Waiting times for calls with loan officers have been raised and layoffs at the Ministry of Education also contributed to a delayed service, according to consumer defenders.
Dom Holmes, 28, who works for a non -profit organization in Manheim, Pennsylvania, said that he woke up in early May to find that his credit score had lost 60 or 70 points overnight.
“All of a sudden, I was a delinquent, even if I had never received a notice,” he said.
Holmes began the process of calling for the reduction in credit scoring, he said. He is considering a move for professional reasons and added that it feared that it is difficult to rent a place to live with his score as it is.
“I am at the ideal age when I should start a family and buy a house,” he said. “When you destroy me financially, what are the chances that I can do this and it’s viable for me?”
Holmes, who was the first person in his family to have obtained his university degree, said that he always had parents and out -of -peel loans, that he intended to continue to pay so that his parents’ credit ratings were not assigned.
He graduated in 2019, shortly before the pandemic, and said he could see how his generation could have trouble repaying debt.
“While I was entering the labor market, the world really stopped,” said Holmes. “Things were really bad for many people for a long time. We always get out of it. And all of a sudden, the switches were removed overnight. ”
Kevin King, credit risk vice-president at the Lexisnexis data and analysis company, said that he expects the effects of student loan collections to begin to collapse in the American economy in the coming months.
“It was several years since it was probably a bad financial strategy to make student loan payments,” he said. “Many consumers have been confused because various government (forgiveness policies) have been adopted and rejected.”
King provides that student loan payments will increase in the so-called “hierarchy of payments”, or the order in which consumers make payments, because the government plans to use “levers to be forced” such as wage stopping and the entry of tax reimbursements.
“What invoice do you pay first, the second and not at all?” Said King. “Historically, student loans are very far from the list. But the government is quite aggressive here to continue the payment activity in a way that could change the hierarchy. Consumers may be more willing to go offend or, failing that, such as a credit card or a loan to pay. ”
The study of the New York Federal Reserve also found that borrowers aged 40 and over were very likely to be offenders about their loans.
Andrew McCall, 58, of Boisse, Idaho, said that he had about $ 30,000 in exceptional loans by obtaining his computer diplomas. He said that he could not afford his monthly payments, which are in the range of $ 250 to 300, and worries what a blow for his credit scoring could mean for all areas of his life.
“The fact that this economy is motivated by debt to start with my score, whatever the financial decisions I make, apart from going to the grocery store,” he said. “My car, my house … your credit rating becomes a social stratifier.”
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The Associated Press receives the support of the Charles Schwab Foundation for educational and explanatory reports to improve financial literacy. The independent foundation is distinct from Charles Schwab and Co. Inc. The AP is solely responsible for his journalism.
