If you have federal student loans, your credit score may already be falling, and if you were enrolled in the SAVE income-driven repayment plan, a wave of new delinquencies is expected once forbearance ends and payments are due.
The federal program kept payments affordable for more than 7 million borrowers before a December 2025 settlement and a March 2026 court judgment ended it, and the financial damage is now spreading fast.
Gen Z borrowers are taking the biggest hit, with their average FICO score dropping three points to 678 in 2025, Experian reported.
That marked the steepest generational decline in the credit bureau’s annual data, pulling young adults further from homeownership and auto financing.
One in four student loan borrowers has fallen behind on payments
The national average masks a sharper reality for borrowers who were counting on the SAVE plan before it was eliminated.
One in four student loan borrowers was delinquent as of the third quarter of 2025, up from 9.2% before the pandemic, the Century Foundation and Protect Borrowers found.
That 25% delinquency rate represents a nearly threefold increase from pre-pandemic levels, and the credit damage has been severe for those borrowers.
Kaydee Ambas, CFEI and content marketing manager at Earnest, said repayment struggles predate the data, which reflects a delayed reporting cycle, according to USA Today.
Borrowers have been falling behind since payments restarted post-pandemic, but those delinquencies won’t fully show up in federal reporting until 2026.
“By blocking access to the very programs designed to help struggling borrowers, the administration is trapping millions in a spiral of debt,” Peter Granville, a fellow at the Century Foundation, warned.
FICO data confirm the credit damage is concentrated among younger borrowers
FICO’s research supports the pattern that Experian and the Century Foundation identified, with younger consumers bearing an outsized share of the fallout.
About 14% of consumers ages 18 to 29 experienced score drops of at least 50 points between October 2024 and October 2025, FICO reported. That rate was roughly four percentage points higher than the figure for the overall adult population.
Borrowers with delinquent student loans saw their credit scores fall by an average of 57 points through the first three quarters of 2025, the Century Foundation and Protect Borrowers found.
By October, FICO’s data put the average decline at 62 points, reflecting the additional months of missed payments hitting credit files.
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About 7.1 million borrowers with payments due, roughly one-third of the population with a student loan payment, had new delinquencies appearing on their credit reports by that time, according to FICO data.
“The resumption of required student loan payments and a continued, modest rise in mortgage delinquencies nudged the average score slightly lower,” Ethan Dornhelm, FICO’s vice president of scores and predictive analytics, explained.
Younger borrowers are bearing the brunt of student loan delinquencies, with millions seeing credit scores plunge as missed payments hit their reports.
New York Fed data show 2.6 million defaults in a single quarter
The Federal Reserve Bank of New York provided the most detailed look at the default wave hitting borrowers across the country right after repayment resumed.
About 3.6 million borrowers entered default during the fourth quarter of 2025 and first quarter of 2026 combined, the New York Fed found.
More than 2 million of those defaults were concentrated in the first quarter of 2026 alone, the New York Fed reported. About 17% of borrowers have fallen at least 90 days past due at least once since payments restarted, the researchers noted.
The defaulting borrowers are older than their pre-pandemic counterparts, averaging 38.9 years of age compared to 36.4 years previously.
Southern states bore the heaviest burden, with Louisiana, Mississippi, Alabama, Georgia, and South Carolina each showing at least 10% of borrowers in default.
Falling credit scores are locking borrowers out of homeownership
The credit damage has consequences that compound over the life of a mortgage or auto loan, and the cost gap is substantial for affected borrowers.
A borrower whose score drops from 680 to 580 would pay about $64,000 more over the life of a mortgage, the Century Foundation calculated.
That same score decline would add approximately $8,800 to the total cost of an auto loan, the organization estimated in its February 2026 analysis.
Only 1.2% of mortgages originated in 2024 went to borrowers with credit scores of 580 or below, compared with 13.4% for those scoring 680 or below. Roughly 2 million borrowers are now effectively locked out of homeownership as a result of these score declines, the Century report found.
Jennifer Zhang, a policy analyst at Protect Borrowers and the report’s co-author, said the administration “spent the last year depriving borrowers of access to affordable repayment plans.”
The national credit picture reflects a growing divide between generations
The credit data make the generational fault line hard to miss: Student loan pressure is dividing the country along age lines, and the numbers bear it out.
The national average FICO score fell to 713 in 2025, down two points from 2024 and marking the first annual decline since 2013, Experian reported.
Baby boomers moved in the opposite direction, with their average score rising one point to 747 in 2025, while Gen X held steady at 709, Experian noted.
The share of consumers with scores in the “poor” range climbed to 14.7% from 13.2%, even as “exceptional” scores above 800 hit an all-time high of 22.8%, according to Experian data.
The FICO report described “a credit market that’s both more challenging for some and more rewarding for others,” with Dornhelm calling it a K-shaped credit economy.
Related: The SAVE Plan is Dead: Why You Must Choose a New Payment Plan Before May