Student Loan Delinquencies Are Dragging Down Credit Scores

What FICO found

In its August 2026 Credit Insights report, FICO found the national average FICO Score held at 714. Underneath that steady average, student loan borrowers split sharply in two directions:

• About 3.2 million consumers with a recent student loan delinquency saw their scores fall an average of 38 points year over year.
• Borrowers who kept paying on time gained an average of 6 points.

Other credit looked healthier. FICO reported that early mortgage delinquency eased to 1.35% from 1.42%, and the 30-day auto delinquency rate fell to 2.6%.

Why student loans are hitting scores now

During the pandemic payment pause, missed federal student loan payments weren’t reported as late. That protection ended, and late payments and defaults are again appearing on credit reports.

The New York Fed’s household debt report for the second quarter of 2026 put student loan balances at $1.651 trillion. It also noted that student loan delinquency figures are being distorted by “the continued impact of the re-reporting of defaulted student debt.” The share of balances moving into serious delinquency (90+ days) was 7.83% in Q2 2026, compared with 12.88% a year earlier, when that re-reporting first hit.

Collections are back too. In May 2025 the Education Department announced it would resume involuntary collections on defaulted federal loans through the Treasury offset program, which can withhold tax refunds and some federal benefits. CBS News reported in December 2025 that wage garnishment notices were expected to start going out in January 2026.

Why the average hides the problem

A national average of 714 suggests nothing much changed. But averages blend millions of people moving in opposite directions. A 38-point fall for a few million borrowers can be offset by small gains for many others who pay on time, which is what FICO’s numbers show.

For the people affected, a 38-point drop is large. It can be the difference between a “good” score and a “fair” one, and it can change both whether a lender says yes and the price of the offer.

What a lower score means for borrowing

Credit scores drive the rates lenders offer. In LendingTree’s marketplace data for the fourth quarter of 2025, the average best personal loan offer was 15.54% APR for scores of 740–799 and 20.61% for 670–739. A 38-point drop can be enough to move someone down a tier.

Offers are conditional and based on one online marketplace’s data; actual rates vary by lender. See how each tier affects payments on our rates by credit score page.

What to do if you’re behind on student loans

1. Contact your loan servicer. Ask about income-driven repayment, deferment, forbearance or getting out of default through rehabilitation or consolidation. Options depend on your loan type.
2. Use only official channels. Federal student loan help is free through your servicer and StudentAid.gov. Be wary of companies that charge upfront fees to “fix” student loans; see our loan scams guide.
3. Protect your other accounts. Payment history is 35% of a FICO Score. Keeping cards and other loans current limits the damage.
4. Check your credit reports. You can get free weekly reports at AnnualCreditReport.com and dispute any errors with the bureau and the lender.

Thinking about a personal loan? Check these first

If a student loan problem has lowered your score and you need to borrow for something else, a few checks can save you money and stress:

• Know your current score and report. Look for the student loan entries and make sure the dates and balances are right.
• Borrow only what you need. At lower credit tiers, every extra dollar costs more. A $1,000 loan over 12 months is about $97 a month at 29.05%, and about $95 at 25.78%.
• Prequalify with soft checks. Compare estimated APRs before any formal application. Our guide to soft and hard checks explains how.
• Make sure the payment fits. A new payment you can’t keep up with adds a second problem to the first. Try our debt-to-income calculator.
• Avoid quick fixes. Payday loans and lenders that guarantee approval or ask for fees upfront are rarely the answer.

Rebuilding after a drop

Late payments stay on your credit report for up to seven years, according to the CFPB, but their effect fades over time, especially as you add new on-time payments. FICO’s data shows the payoff: borrowers who kept paying on time gained points while others lost them. If you need a small loan while you rebuild, our fair credit options page explains what to expect.

Frequently asked questions