If you graduated from college with minimal or no student loans, count yourself lucky.
Student loans have long been a critical yet complicated part of millions of Americans’ financial lives — a heavy burden for some, but also a foundation for building credit.
However, recent changes in credit scoring practices are quietly removing certain student loan debts from credit reports. The changes could affect how borrowers manage credit, qualify for loans, and ultimately build wealth.
Key student loan data to know
- Total U.S. student loan debt reached a record $1.814 trillion in 2025, held by more than 42 million borrowers nationwide, according to Lending Tree.
- The average federal student loan balance per borrower is approximately $39,075, nearly doubling since 2007, according to the Education Data Initiative (EDI).
- Roughly 38% of borrowers are currently up to date on payments, while more than 30% are delinquent or in default, highlighting ongoing repayment struggles, according to Lending Tree.
- The average score for Americans in their late teens and 20s fell three points to 676 in April, compared with the same month a year earlier, according to a report published this week by FICO.
- Older borrowers (ages 50-61) carry some of the highest average balances — over $46,000 — and are increasingly facing repayment difficulties and defaults, according to Best Colleges.
Student loan debt has long been both a burden and a way to build credit.
Image source: Getty Images/TheStreet
The changing landscape of credit scoring: what you need to know
Traditionally, credit scores have considered all forms of debt — including student loans — to assess borrower risk. Responsible repayment of student loans historically boosted creditworthiness, aiding borrowers in securing mortgages, credit cards, and other loans.
But the major credit bureaus (i.e., Experian, Equifax, and TransUnion) recently updated their scoring models to exclude some types of student loans, especially government-backed installment loans with deferments or forgiveness programs.
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The goal is to provide a more accurate snapshot of a consumer’s current financial status without penalizing borrowers for longstanding, nondelinquent student debt.
According to the Consumer Financial Protection Bureau (CFPB), the changes reflect an effort to treat student loan debt differently due to its unique repayment features, including income-based repayment plans and potential forgiveness.
Why leaving student loans out of credit scores matters
At first glance, omitting student loans from credit scores sounds beneficial. After all, it means less debt showing on your credit report.
However, credit scoring serves lenders as a risk gauge; omitting significant debts can sometimes create a less complete financial picture.
Lenders might become more cautious without context related to loans, leading to tighter lending criteria or higher interest rates. Younger borrowers, who often build credit primarily through student loans, might find their credit profiles thinner, complicating approvals.
What this means for homebuyers and credit seekers
Student loans have been a double-edged tool for homebuyers, especially first-time buyers. Having a high balance, as long as it is accompanied by a repayment history, helps establish creditworthiness for a mortgage.
Removing these loans from credit scores could yield higher borrowing costs or stricter lending hurdles because of less developed credit histories.
Consumers refinancing other debts or applying for credit cards may experience fluctuating scores. While some borrowers might benefit from having a cleaner credit snapshot, others could lose the positive history of steady student loan payments.
“Look at how credit scores are calculated: the length of credit history is weighted at 15%, alongside payment history (35%), and amounts owed (30%), with credit mix and new credit making up the remaining 10% each,” says Former Editor and Publisher of TheStreet Robert Powell, CFP, a personal finance expert.
“Since payment history is the largest factor at 35%, borrowers who miss payments or default on student loans wouldn’t see their credit score tank from these missed payments,” Powell says.
Opening secured credit cards, responsibly managing other installment loans, and maintaining low credit utilization ratios can offset the reduced relevance of student loans.
Powell explains the downside, however.
“Borrowers who consistently make on-time payments miss out on building that crucial 35% payment history component. Years of responsible payments essentially don’t count.”
What student loan borrowers should do now
If you have student loan debt and are trying to determine how it is affecting your creditworthiness:
- Regularly review credit reports from all three bureaus for accuracy, paying close attention to how student loans are reported.
- Prepare for possible lending shifts by diversifying credit types.
- Monitor updates from credit bureaus and stay informed of scoring model changes.
- Consult financial advisors for personalized credit-building plans.