Do Student Loans Affect Credit Score?
5 Min Read | Last updated: October 14, 2024
Learn how student loans can affect your credit, how a history of on-time payments can help you in the long run, and what you should do if you’re unable to make a payment.
At-A-Glance
- Student loans are a form of credit and therefore affect your credit score.
- On-time student loan payments can help keep your credit score healthy.
- If you can’t make a payment, there are courses of action you can take to protect your credit.
If you’ve gone to college or have sent your child to college, you’re probably familiar with student loans. While this lending option can be a valuable resource to help students achieve their educational goals, how student loans are repaid can directly impact a borrower’s credit history — especially for young adults with no other credit history on file.
Read on to learn how student loans affect your credit score and how to mitigate any negative effects if you find yourself unable to keep up with payments.
How Do Student Loans Affect Your Credit Score?
Just like any other loan, student loans can and do affect the borrower’s credit score. Your student loan amount and any payments that you make — or don’t make — go on your credit report and can either help or harm your credit score. Put simply, on-time payments are beneficial; late and missed payments are not.1
For borrowers who have never had a credit card or taken out a loan, student loans may be their first opportunity to establish credit history.
Do Student Loans Affect a Credit Score While Still In School?
Even though you generally don’t have to start paying off student loans until you graduate, they’ll still appear on your credit report. As a result, they can impact your credit score.
The good news is that since most student loans don’t require repayment until six months after graduation, not making payments during this period won’t negatively affect your score.2 But that doesn’t mean you have to wait to start paying off the loan. Any extra payments may help reduce the amount of interest you’ll pay in the long run.
How On-Time Student Loan Payments Can Help Your Credit Score
For student loans to have a positive impact on your credit score, you have to show you are a responsible borrower. This means making consistent, on-time payments once your repayment period begins. Minimum payments are usually due once a month, but payments can be made more frequently if desired. Payment history will then be reported to the three major credit bureaus — Experian, Equifax, and TransUnion — and will appear on your credit report.
Establishing good credit can benefit your financial future. For many, student loans are the means to an education that will kick-start a bountiful professional life. Paying student loans on time is just another way to set yourself up for success. Establishing a consistent, on-time payment history can help boost your credit score, opening a number of financial benefits down the line. For example, a healthy credit score can make it easier to take out loans and credit cards in the future — and get better terms and rates on mortgages, auto loans, and more.
How Late Student Loan Payments Can Hurt Your Credit Score
As with any credit account, missed or late student loan payments can negatively affect your credit score. The good news is these missed payments usually won’t be reported to federal student loan servicers until they’re 90 days past due.3 This gives borrowers a bit of time to catch up if finances get tight or the missed payment was a mere oversight. However, it’s important to remember that private student loan providers are not required to provide the same leeway and may report missed payments differently.4
For some federal loans, if a borrower goes several months without making a payment — more than 270 days — the loan will go into default.3 Defaults may stay on credit reports for years, blemishing a credit score. What’s more, once a federal student loan is in default, the government may withhold the borrower’s federal tax refund. Borrowers may also lose access to certain repayment plans and other benefits.3
What to do if you can’t make a student loan payment: As soon as you think you may have trouble making your monthly payment, it’s wise to contact your lender immediately. Federal loan servicers, for example, may offer helpful options such as a new income-driven repayment plan, lowered monthly payments, and deferment opportunities.3
How Paying Off Student Loans Might Impact Your Credit Score
Surprisingly, paying off your student loans, whether in a lump sum or submitting your final installment, may negatively affect your credit score. While seeing the account appear on your credit report as “paid” is a satisfying and notable financial achievement, a closed account may reduce your credit mix, causing a dip in your score.5
What matters most is having met monthly payment requirements on time because payment history makes up 35% of your FICO credit score.6
The Takeaway
There’s no getting around it — student loans can and will affect your credit score. But for many borrowers, this is the chance to kick off your financial future on a positive note. On-time payments made in full can positively affect your credit history and, therefore, your credit score, whereas missed payments can tarnish your credit. Fortunately, federal student loan servicers may have options for borrowers struggling to make repayments, so don’t hesitate to ask.
1 “Do student loans affect my credit score?,” Consumer Financial Protection Bureau
2 “When do I have to start repaying my federal student loans?,” Federal Student Aid
3 “Student Loan Delinquency and Default,” Federal Student Aid
4 “Options for repaying your private education loan,” Consumer Financial Protection Bureau
5 “How Can Student Loans Affect My Credit,” Experian
6 “How Payment History Impacts Your Credit Score,” myFICO
Sara LoPiccolo is a freelance writer who specializes in financial and medical education, focusing on medical, legal, and regulatory guidelines.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
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