It’s Time to Pay Your Student Loans: What Happens if You Fall Behind?

It’s Time to Pay Your Student Loans: What Happens if You Fall Behind?

If you’re a borrower with federal student loans, the time has come to start repaying your loans again. After a nearly four-year hiatus, missed payments can have consequences that may worry financially stretched borrowers. However, there are safeguards in place to help borrowers who fall behind on their payments. In this article, we will explore what happens if you fall behind on your student loans and how it can affect your credit standing.

The Consequences of Missed Payments

With the resumption of student loan payments, many borrowers may find themselves struggling to make ends meet. According to TransUnion, the total monthly obligations for borrowers have increased, even without their student loan bill. Liz Pagel, senior vice president of consumer lending at TransUnion, explains that adding the new payments to the mix can be a noticeable payment shock for borrowers. While some borrowers may have the excess funds to make these payments, others could face difficulties.

Safeguards for At-Risk Borrowers

Fortunately, there are safeguards in place to protect borrowers who are at risk of falling behind on their payments. For the year after repayment begins, federal student loan borrowers who miss payments should see relatively minimal changes to their credit standing. The Biden administration has implemented rules that treat missed payments as a forbearance rather than delinquencies. This means that missed payments will not be reported to credit-reporting companies as delinquencies, and borrowers will not be considered in default. Instead, missed payments will be reported as a forbearance, and any skipped payments will be added to the end of the loan term.

Impact on Credit Scores

Although missed payments will be reported as a forbearance, it’s important to note that interest will continue to accrue on these missed payments, and the loan balance may even increase. As a result, skipping payments can still have a slight impact on your credit score, depending on your circumstances. The most damaging consequences will occur after the Biden administration’s yearlong “on-ramp” period ends. Borrowers who continue to miss payments beyond this period may experience a negative impact on their credit scores.

Understanding Credit Scores

To understand how missed payments can affect your credit score, it’s essential to know how credit scores are calculated. Two popular scoring models, FICO and VantageScore, use various data categories to generate three-digit scores. Payment history is the most critical category, accounting for 35 percent of your FICO score. Therefore, missed payments can severely damage your score. However, during the on-ramp period, as long as your student loan is reported without delinquency, the payment history dimension of your FICO score calculation will not be negatively impacted.

Impact on Loan Balances and Interest Accrual

While a forbearance is not viewed unfavorably by credit score models, the impact on your score may depend on other factors. If you have an installment loan and the loan balance is not being paid down while interest is accruing, the increasing outstanding balance on the loan may result in a modest negative impact to your credit score. It’s important to note that interest will continue to accrue on missed payments, and the borrower’s next payment will be applied toward the accrued interest first until it is paid off.

Monitoring Your Credit Reports and Scores

If you do miss payments, it’s crucial to monitor your credit reports and scores to ensure that everything is being reported correctly. Mistakes can happen, and any errors on your credit report can be costly. A lower credit score may lead to higher interest rates on loans or even denial of credit altogether. If you believe a missed student loan payment was improperly recorded, contact your loan servicer and inform them of the error. You can also file a dispute with the credit bureau that has the erroneous information on your report to get it corrected. It’s recommended that all consumers regularly check their credit reports, which can be obtained for free through or by contacting the credit bureaus directly.

Exploring Repayment Options

For borrowers who are having trouble making their payments, it’s essential to explore the available options. Income-driven repayment plans can be particularly helpful, as they base payments on income and family size. The newest income-driven program, SAVE, is expected to generate the lowest payments for most borrowers and can even reduce payments to as low as $0 for those with lower incomes. Starting from next October, borrowers who miss payments will be reported as delinquent three months later. Therefore, it’s crucial to stay proactive and take advantage of any available programs to avoid negative credit consequences.


As student loan payments resume, it’s important to understand the potential consequences of falling behind on your payments. While missed payments will be reported as a forbearance rather than delinquencies for the first year, it’s still essential to stay on top of your payments to avoid any negative impact on your credit score. Monitoring your credit reports regularly and exploring repayment options can help ensure you stay on track with your student loans. By staying proactive and taking advantage of available programs, you can navigate the repayment process while safeguarding your credit standing.

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