How To Keep Late Student Loan Payments From Hurting Your Credit Score

For the first time since the start of the Covid-19 pandemic, borrowers with federal student loans are dealing with the credit-related consequences of late payments and letting their student loans go into default. This can include damage to credit scores, along with the prospect of penalties and collection activities including the seizure of wages, tax refunds, and even Social Security benefits.

This change may seem out of the blue, but it comes at the end of a long list of temporary fixes put in place to help borrowers struggling to repay loans during an unprecedented time (the pandemic). The U.S. Department of Education temporarily paused monthly payments on federal student loans while freezing interest rates at 0% from March 2020 through the end of September 2023, after which a 12-month on-ramp period was offered borrowers even more time.

Student loan companies didn’t report late payments or loans in default during the 12-month on-ramp, but that ended on Sept. 30, 2024.

Now that we’re well into 2025, student loan servicers are once again reporting late payments and loans in default to the three credit bureaus — Experian, Equifax, and TransUnion.

Ultimately, this is why late payments and loans into default are (or may soon be) dragging down the credit scores of borrowers for the first time in years. And with the Trump administration unlikely to extend any more “fixes” or provide any help, the time for borrowers to turn this situation around is now.

Getting Current On Your Student Loans

If you are behind on student loans and your credit score has taken a hit, there are steps you can take to protect your credit. Unfortunately, they all require getting back on track with repayment on your federal student loans, which may be a problem if you’re experiencing hardship. Not only that, but some of the steps you might take to get back on a repayment plan are unavailable for the time being.

For example, you might normally begin the process of getting student loans out of default by consolidating your federal student loans with a Direct Consolidation Loan. However, the application for federal student loan consolidation is currently paused.

You can still rehabilitate federal student loans in default using steps outlined on the U.S. Department of Education website. The process can help you get your loans back into good standing, although student loan rehabilitation requires you to contact your loan servicer. From there, the steps you’ll take depend on the type of federal student loans you have.

If you have Direct Loans and FFEL Program Loans, for example, you must:

• agree to make nine “voluntary, reasonable, and affordable monthly payments” in writing within 20 days of the due date, and
• make all agreed upon payments during a period of 10 consecutive months

Also remember that student loans made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program aren’t considered in default until a payment hasn’t been made for at least 270 days.

Before then, loans with a missed payment or late payments are considered delinquent. Student loan servicers typically begin reporting late payments on delinquent federal student loans when a payment hasn’t been made for 90 days – that’s why the first wave of late payments was reported in February.

If your student loans are (or will be) delinquent but not in default, you should call your loan servicer to see which options may be available to you. They may be able to put your loans into a temporary deferment or forbearance so you can prepare yourself to begin making payments again. You may also be able to get back on track by paying amounts overdue.

Unfortunately, you cannot try to get your federal student loans into an income-driven repayment plan at the moment since applications for all IDR plans are currently closed. In addition to that, the SAVE repayment plan was struck down by the courts and is considered officially dead.

How To Boost Your Credit Score

Once you have a plan to begin repaying your student loans, you can focus on repairing your credit. In good news, at least part of the work will be done for you once you get your loans out of delinquency or default and begin making on-time payments each month.

Other steps to increase your credit score include:

• Make on-time payments on credit cards and loans: Since your payment history makes up 35% of FICO scores, you’ll want to make all credit card and loan payments early or on time each month. If you’re afraid you’ll forget, consider setting up some of your bills for automatic payments.
• Build credit with a secured credit card: If you need a tool to build credit and your score isn’t high enough to get a traditional credit card, apply for a secured credit card instead. These cards require a refundable cash deposit as collateral, but they help build credit by reporting your payments to the credit bureaus each month.
• Pay down existing debt: Since how much revolving debt you have in relation to your credit limits makes up another 30% of your FICO scores, paying down credit card debt can help your credit immensely. Most experts recommend keeping your utilization below 30% of your available credit limits for the best results.
• Check your credit reports for errors: Check all three of your credit reports at AnnualCreditReport.com for errors and other incorrect information that could be dragging your score down. If you find incorrect information, you can formally dispute it with the Federal Trade Commission and have it removed.

If you begin making payments on your student loans and take some simple steps to increase your credit score, any damage you’ve experienced so far should eventually take care of itself.

We can also hope to have more clarity about available repayment options for federal student loans in the coming months. By making payments with the plan you have right now, you can begin restoring your credit score while you wait things out.