Last week we noted new report from the New York Federal Reserve, which showed that while Americans’ credit card debt is falling, credit scores are starting to decline due to an uptick in student loan delinquencies.
The NY Fed’s Center for Macroeconomic Data’s quarterly report reveals that overall household debt rose by $167 billion – with credit card debt declining by $29 billion. Yet, the delinquency rate for student loans surged from below 1% to nearly 7.7% after a pandemic-era pause on student loan payments was lifted in September 2023.
While the payments were resumed, policymakers extended a one-year ramp-up period that shielded borrowers’ missed payments from being reported to
Needless to say, it’s total carnage among borrowers, as one can see from Reddit’s ‘StudentLoans’ forum.
“My credit score dropped 240+ points. i dont know what to do!!” said one Redditor, who says she can’t pay her bills because she doesn’t have a job after graduating in 2024.
“My score was in the high 700s and dropped to about 480,” said another Redditor, who said they were notified by reporting agency Experian that their credit “took a massive hit.”
“My transunion and equifax scores took a -100 hit due to my loans “just being recognized this January,”” reported another borrower.
“My credit dropped from a 720 to a 550,” said yet another – who reported having “6 total loans from school” that have been “deferred for a while.”
“Credit Got Torched” reads a Friday post. “i am unfortunately 1 of the 9 million people who received delinquency marks on my credit report from the dept of education for student loans, which decreased my credit score by 118 points.”
Interestingly, several redditors said their scores tanked from loans taken out in their names that they were unaware of – including the first example, who said “I have 10 student loans overall, 5 sub, 5 unsub, and have never had anything else on my credit or anything, no cards or loans, etc. I did get my identity stolen, but I disputed the loans that were taken out fraudulently, and my score was barely affected at all from it.”
That is what happens when you don’t pay your debts.