Unpaid Student Loans Drag Down Credit Scores

Millions of borrowers are defaulting or delinquent on student loan payments, impacting their ability to make major purchases.

Published on Feb. 12, 2026

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According to the Federal Reserve Bank, millions of people with student loans are defaulting or delinquent on their payments, causing their credit ratings to drop and making it difficult for them to buy homes or cars. The pandemic may have caused confusion around repayment rules, leading some borrowers to unknowingly fall behind. Experts warn that it can take years to rebuild a credit score that has been damaged by student loan delinquency, and that defaulted borrowers could face wage garnishment.

Why it matters

Student loan debt is a major financial burden for millions of Americans, and unpaid loans can have far-reaching consequences beyond just a damaged credit score. This issue impacts the broader economy, as it becomes harder for borrowers to make major purchases like homes and cars, which are important drivers of economic growth.

The details

The Federal Reserve Bank found that a significant number of student loan borrowers are either defaulting or delinquent on their payments. This means their credit ratings are dropping, making it more difficult for them to qualify for loans, mortgages, and other forms of credit. Experts say the pandemic-era changes to repayment rules may have caused confusion, leading some borrowers to unknowingly fall behind. Those who are delinquent could even face having money taken directly from their paychecks.

  • The Federal Reserve Bank's findings were from late last year.

The players

Federal Reserve Bank

The central banking system of the United States that conducts the nation's monetary policy.

Shane Stewart

A certified financial planner with DMBA who provided expert commentary on the issue of student loan delinquency.

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What they’re saying

“The rule changes during the pandemic may have caused confusion and some didn't even realize they were still on the hook for repayment.”

— Shane Stewart, Certified Financial Planner (kslnewsradio.com)

What’s next

Experts urge borrowers who are behind on student loan payments to focus on getting current to avoid further damage to their credit and the potential for wage garnishment.

The takeaway

The widespread issue of student loan delinquency is having a significant impact on the financial well-being of millions of Americans, highlighting the need for better education and support around repayment options to help borrowers avoid the long-term consequences of defaulted loans.