Missed or late student loan payments can once again be reported to credit bureaus: Here’s what to know

The Biden Administration’s moratorium on delinquent student loan payments being reported to credit bureaus ended September 30, 2024.

This moratorium, put in place by the U.S. Department of Education, was meant to help student borrowers following the end of the federal student loan payments freeze that took place from March 2020 to September 2023. This freeze was the federal government’s response to the Covid-19 pandemic.

Following the payments freeze, the federal government implemented a temporary credit shield that protected borrowers from having late or missed payments reported to credit bureaus and receiving delinquency marks on their credit reports. This moratorium lasted from October 2023 to September 2024. The federal government referred to this as an “on-ramp” for federal student loan borrowers.

Let’s break down what the end to this moratorium may mean for student loan borrowers going forward.

Who was eligible for the student loan payments moratorium?

Student loan borrowers who were eligible for the federal government's student loan payment pause, otherwise known as “forbearance,” as a result of the COVID-19 pandemic, were automatically eligible for what was known as an on-ramp period that prevented federal student loans in delinquency from being reported to credit bureaus. Borrowers who qualified didn’t need to provide any additional paperwork or apply to be eligible for the moratorium — it was automatic.

The most recent numbers by the U.S. Government Accountability Office show that this action shieled nearly 6.7 million borrowers from adverse credit reporting.

What happened during this on-ramp period for eligible student loan borrowers?

During what the federal government referred to as an on-ramp period, the U.S. Department of Education didn’t report borrowers as delinquent if they were 90 days past due on their payments. Instead, borrowers experienced the following:

• Borrowers’ accounts were listed as current even though borrowers may have been behind on payments
• Federal student loan servicers didn’t report accounts as delinquent to credit bureaus
• Federal student loans for delinquent borrowers didn’t go into default

It’s worth noting that even though student loan borrowers didn’t see delinquent payments appear on their credit reports, their payments were still due, and their outstanding loans still accrued interest in the background as of September 2023.

What happens to student loan borrowers who miss payments now?

Student loan borrowers who are late or miss payments may now experience negative consequences, such as a potential drop in their credit score.

One of the factors that goes into calculating a person’s credit score is payment history. Depending on which credit scoring model — and the two most common are the VantageScore^® and the Fair Isaac Corporation (FICO^®) models — someone’s referencing, they may see a different impact.

Should student loan borrowers care about this change?

Some student loan borrowers may find their credit score is impacted by this change. Having a strong credit score may make it easier to get a car loan, rent an apartment, get a mortgage, or even help land specific jobs that do credit checks on applicants.

Some of the advantages of having a strong credit score can include:

• Potentially receiving more favorable annual percentage rates (APRs) on loans and mortgages
• Possibly having a lower APR on your credit cards
• Potentially higher chance of getting approved for leases, mortgages, and loans
• Potentially higher odds of gaining access to higher credit limits

Please note that other factors may also be involved in lender decisions. Lenders look at your credit score along with other indicators of creditworthiness or financial stability.

Final thoughts

If you’re a student loan borrower worried you won’t be able to meet your upcoming student loan payment deadlines, you may want to consider reaching out to your federal student loan servicer to explore your options. You may also want to see if you qualify for one of the federal student loan forgiveness options.