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- Finance. Does paying off studenDoes paying off student loans help your credit score? The overall benefits of a strong payment historyt loans help your credit score? The overall benefits of a strong payment history
As the busy spring and summer homebuying season heats up, many potential homeowners could face a hidden obstacle - their student loans.
Millions of Americans with federal student loans are discovering that missing payments after the pandemic-era freeze could dramatically hurt their credit scores, potentially putting homeownership dreams on hold.
According to a recent report from the Federal Reserve Bank of New York, nearly 10 million borrowers are facing student loan delinquency in 2025, with some seeing their credit scores plunge by as much as 150 points or more.
For many hopeful homebuyers, that's the difference between securing a conventional mortgage and struggling to qualify for a loan at all.
Why student loan delinquencies are rising
During the pandemic, federal student loan payments were paused from March 2020 through September 2023. But when that relief ended, not everyone was ready to resume payments.
Some borrowers mistakenly believed their loans were still in deferment. Others were impacted by the transition to new loan servicers or unaware of the repayment restart.
Once a borrower falls 90 days behind on payments, loan servicers are required to report the delinquency to credit bureaus. That's when the real financial trouble begins.
"If a student loan delinquency hits your credit file, especially for those with high credit scores, it can lead to a significant drop - sometimes up to 170 points," said Martin Lynch, president of the Financial Counseling Association of America.
For example, a borrower with a 760 credit score - typically good enough for the best mortgage rates - could drop into the 590 range after a delinquency. At that level, FHA loans may be their only option, often requiring higher down payments and additional fees.
Moreover, lower credit scores mean higher mortgage rates, which could make buying a home far less affordable.
What borrowers should do right now
If you're unsure of your loan status, experts recommend immediately visiting studentaid.gov to check your repayment history and find your loan servicer. that your details are up-to-date and review your payment status.
"If you've missed payments, don't wait. your servicer and ask about options to bring your current," advised Scott Buchanan, executive director of the Student Loan Servicing Alliance.
Options may include forbearance or deferment to temporarily pause payments, though these may have different conditions. Preventing a delinquency from turning into a default - which happens after 270 days of missed payments - is critical.
Defaulting on federal loans can lead to wage garnishment, tax refund seizures, and loss of eligibility for future financial aid or repayment plans.
For homebuyers, the best approach is to act quickly. "Getting your loans back in good standing can demonstrate to lenders that you're managing your debt responsibly," said Andrew Lokenauth, a credit counselor based in Florida.
Lenders may be more willing to work with borrowers who have resolved their delinquencies and resumed regular payments. Mortgage brokers experienced with borrowers carrying student loan debt may also help navigate the process.
Final takeaway for prospective homeowners
The resumption of student loan payments in 2025 is already creating widespread financial ripple effects - especially for those hoping to buy a home soon.
While delinquencies can temporarily derail mortgage plans, they don't have to end them. By staying proactive, communicating with loan servicers, and seeking financial advice, borrowers can repair their credit and still achieve homeownership.
But the key is acting before the damage is done.