How Do Student Loans Affect Credit Score?
UpdatedApr 23, 2025
- Student loans affect your credit score the same way other loans do.
- Paying a student loan on time could help improve your credit score as you build a good repayment history.
- Falling behind on student loans could hurt your credit score, so it’s best to explore your options when you can’t keep up.
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Students use student loans to pay for tuition, fees, room and board, and other necessary expenses to earn a degree. Like other types of loans, student loans can appear on your credit reports. Whether student loans impact your credit score positively or negatively depends on how you manage them.
Once you graduate, you'll need to pay back what you borrowed with interest. If you have student debt (or you're thinking of borrowing to pay for school), there's a lot to consider, including:
How do student loans affect credit score calculations?
How will student loans impact your finances once you graduate?
How Student Loans Could Help Your Credit
Student loans can be a good thing for your credit for a few reasons.
Payment history
Your payment history carries the most weight of the various factors that influence your credit score. On-time student loan payments could help you build a good credit history.
Your lender or loan servicer might offer an incentive to get you to pay on time in the form of a rate discount. Many federal and private student loan lenders offer a 0.25% rate discount when you enroll in automatic payments. That's a win-win, since you can get a lower rate and avoid late payments at the same time.
Credit mix
Part of your credit score is based on your credit mix, or the types of credit accounts you're using.
Having both revolving and installment debt shows lenders that you have experience with a variety of credit types. Revolving debt is a line of credit that replenishes, the way a credit card does. Installment debt is a loan with fixed monthly payments.
Account age
Student loan debt could help improve your credit history age, which is another credit score factor. The longer you pay on your student loans, the more your credit history ages, which could cause your credit score to rise.
How Student Loans Could Hurt Your Credit
Student loans are a type of installment debt. As with any other installment loan, you borrow a set amount and then pay that money back with interest in monthly installments. Over time, the balance should eventually go down to zero. Once the balance is paid off, the loan account is closed.
To understand how student loans can hurt your credit, it helps to know the factors that go into credit score calculations. FICO® Scores, the most commonly used credit scores, are based on five factors:
Payment history: 35% of your score
Credit utilization: 30% of your score
Credit age: 15% of your score
Credit mix: 10% of your score
Credit inquiries: 10% of your score
Student loans don't affect credit utilization because they are installment loans. Credit utilization calculates how much of your revolving credit limit (such as credit cards) you're using at any given time.
Student loans do affect credit scores negatively when they’re paid late. And the way late payments are reported can depend on the type of loan:
Federal loans: Loans become delinquent the first day after a payment is missed. If you're delinquent for 90 days or more, your loan servicer will report your account to the three major credit bureaus.
Private loans: Private student loan lenders typically report late payments to the credit bureaus after 30 days.
Allowing a student loan to go into default can be even more damaging. Most federal student loans go into default if you haven’t made a payment in more than 270 days. There’s no single benchmark for defaulting on private loans, since each lender sets its own terms. But many private loans go into default if you haven’t made a payment in more than 120 days.
If you default on private student loans, your lender might sue you for the unpaid balance. If they win their case, you could end up with a judgment on your credit report. The lender could also seize your bank account or garnish your wages to force you to pay.
Defaulting on federal loans typically doesn't result in a lawsuit, but your tax refunds could be withheld and your wages could be garnished. Plus, your default will typically be reported to the credit bureaus. That could result in a lower credit score, making it harder to get approved for other loans or lines of credit if you want to get a credit card, buy a car, or apply for a mortgage.
Student Loans and Your Debt-to-Income Ratio
Student loans affect your debt-to-income ratio, or DTI. Your debt-to-income ratio is the percentage of your income that goes toward monthly debt repayment.
DTI doesn’t directly affect your credit score, but it’s a big factor in lending decisions. Lenders look at DTI ratios to ensure that you're not overburdened financially. A lower DTI means you might have room in your budget for a new loan payment. A higher DTI means most of your money is already spoken for.
The debt-to-income ratio can be critical if you're hoping to get a mortgage to buy a home. Generally, lenders look for a DTI of 43% or less for mortgage approvals. If you have a significant amount of student loan debt, that could make it harder to get approved for a home loan.
Do Deferred Student Loans Show On Your Credit Report?
Payments on your student loans may be deferred while you're in school. They may also be delayed for a certain number of months after you graduate. Federal student loans, for example, have a six-month grace period after graduation when no payment is due.
You can also defer federal student loans if you’re experiencing financial hardship and need temporary debt relief. The Department of Education can also put federal student loans into forbearance temporarily if you can't pay. Private student loans generally don't offer these benefits, though some lenders will allow you to defer or pause loan payments under certain circumstances.
There's a difference between missing payments on student loans and not paying them because they're deferred. Student loans can still appear on your credit reports when they are deferred. However, having student loans in deferment on your credit reports shouldn’t negatively impact your credit score.
If you apply for a new loan while your student loan payments are paused, the lender may include the potential payment in your debt-to-income ratio. That’s because they want to make sure that you can afford the new account plus your future student loan payments.
Once your student loans come out of deferment, you're required to start making payments as scheduled. At that point, missing a payment or paying late could hurt your credit score.
If your federal student loans go into forbearance, it shouldn't have a negative impact on your credit score as long as you meet eligibility requirements and follow your payment schedule.
What If You Can’t Pay Your Student Loan?
If you can't make payments on your student loans, what you do next may depend on your loan type. With federal loans, you have three options for student loan debt relief:
Apply for deferment
Put loans into forbearance
Request an income-driven repayment plan
Deferment is available for borrowers experiencing specific situations, such as financial hardship, illness, or active military service. You can also defer loans while you're enrolled in school at least half-time.
Forbearance allows you to pause loan payments temporarily if you're struggling to make payments for any reason. You can also apply for forbearance if you're serving in AmeriCorps, completing a medical or dental internship or residency, have been activated for National Guard Duty, or have student loan payments that exceed 20% of your monthly gross income.
The difference between deferment and forbearance has to do with interest. During deferment, you may or may not accrue interest on your loans, depending on the type of loan you have. The interest keeps accumulating on loans in forbearance, so you could end up owing more money overall once the forbearance period is up.
An income-driven repayment plan can help you continue paying on your loans, with payments tailored to your income. There are different income-driven repayment plans to choose from, and you can apply online through the Department of Education website.
If you have private student loans you’re struggling to repay, whether you can get any student loan debt forgiveness will depend on your lender. Private lenders aren't required to offer deferment, forbearance, or income-driven repayment plans, but yours may be willing to work with you. If not, you may need to consider refinancing your student debt into a new loan to get a lower monthly payment.
Talking to your loan servicer or lender can help you avoid defaulting on federal or private student loans. The lender or loan servicer can suggest solutions for dealing with your loans so that you don't run the risk of falling behind on payments and damaging your credit score.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during November 2024. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In November 2024, people seeking debt relief had an average of 79% credit utilization.
Here are some interesting numbers:
| Credit utilization bucket | Percent of debt relief seekers |
|---|---|
| Over utilized | 30% |
| Very high | 32% |
| High | 19% |
| Medium | 10% |
| Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Collection accounts balances – average debt by selected states.
Collection debt is one example of consumers struggling to pay their bills. According to 2023, data from the Urban Institute, 26% of people had a debt in collection.
In November 2024, 30% of debt relief seekers had a collection balance. The average amount of open collection account debt was $3,203.
Here is a quick look at the top five states by average collection debt balance.
| State | % with collection balance | Avg. collection balance |
|---|---|---|
| District of Columbia | 23 | $4,899 |
| Montana | 24 | $4,481 |
| Kansas | 32 | $4,468 |
| Nevada | 32 | $4,328 |
| Idaho | 27 | $4,305 |
The statistics are based on all debt relief seekers with a collection account balance over $0.
If you’re facing similar challenges, remember you’re not alone. Seeking help is a good first step to managing your debt.
Manage Your Finances Better
Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.
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Is debt consolidation a good idea for student loan debt?
Government-backed student loans are not particularly good candidates for debt consolidation. Most already have low interest rates. And. government-sponsored student loans offer borrowers special rights and advantages like forgiveness in some cases and income-based repayment programs. You’d lose those special features if you replaced this kind of loan with another form of debt. Private student loans may be better candidates.
Does public service loan forgiveness apply to private student loans?
No, it does not. That is offered only as a benefit for federal student loan borrowers. The same goes for debt forgiveness tied to military service, teaching and service in an AmeriCorps program.
Is the government going to forgive student loan debt?
It's been talked about a lot, but there are some serious obstacles to it happening. You may be better off checking out one of the types of relief that is available already. Several of these are described in this article.
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