Will the Resumption of Student Loan Payments Tank Your Finances?

If asked to describe the effect that the COVID-19 pandemic had on their finances, most people would not use the word “relief.”  For the wealthiest and most educated people in society, the pandemic gave us a glimpse of how to live modestly and avoid lifestyle creep.  We went for walks and cooked from scratch instead of going out to South Beach and splurging on gourmet cupcakes.  We may have missed the companionship of our coworkers, but working from home where you can fold laundry or unload the dishwasher when there is a pause in the action beats sitting in a cubicle all day, especially if you are getting paid the same amount.  People with advanced degrees spent the pandemic reading for fun and paying down debt.  In 2021, journalists even spoke of a K-shaped curve, where members of the learned professions paid down their debts while everyone else’s debt balances increased.  Part of that momentum came from a respite from paying student loans.  Now student loan payments have resumed, and that could be bad news for former students whose budgets can scarcely afford another monthly bill.  If your credit score took a hit when student loan payments resumed, contact a Boca Raton credit repair lawyer.

Graduates With Excellent Credit Have the Most to Lose

The bad news is that student loan borrowers whose payments have been paused since the beginning of the COVID-19 pandemic must now begin paying again.  The worse news is that, if you miss a payment, this negative mark shows up on your credit score immediately, and it will take years for it to go away, even if you immediately pay the past due amount and cure the delinquency.

If you already have some dings on your credit report, then a missed payment will lower your credit score by about 50 points.  If your credit score is in the highest range, above 780, you have the most to lose.  A single missed payment could cause your credit score to drop by 175 points.  In either case, it will only increase gradually as you continue to make payments on time.

Should You Borrow Now Before Your Credit Score Tanks?

Now that student loan payments are beginning again, you should reassess your finances.  Yes, it would have been nice to take out a loan when you qualified for one.  Now, you should focus on not falling farther behind on your student loan payments.  This could mean cutting out big expenses, or it could mean taking on additional jobs where you can find them.  The good news is that, if your credit score dropped after it was above 780, you are still in a stronger financial position than most people are.

Work With a Debt Lawyer About Coping With the Resumption of Student Loan Payments

A South Florida debt lawyer can help you improve your credit score if you missed a payment when the lenders of federal student loans began collecting payments again after the pause.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.

Source:

cnbc.com/2025/05/05/credit-score-impact-from-student-loan-collections-default.html