Household Debt Reaches $18.2 Trillion as Student Loan Delinquencies Trigger Credit Score Plunge

June 17, 2025

The Federal Reserve Bank of New York's latest Quarterly Report reveals household debt reached $18. 20 trillion in Q1 2025, with student loan delinquencies surging dramatically following the end of federal payment protections. Nearly six million student loan borrowers, about 14 percent, were 90+ days delinquent or in default between January and March 2025, compared to below 1 percent during the pandemic payment freeze.

Who is affected

Nearly six million student loan borrowers who are 90+ days delinquent or in default
Over 2.2 million individuals whose credit scores fell by over 100 points
Over 1 million borrowers experiencing credit score drops of at least 150 points
More than 2.4 million newly delinquent borrowers who previously had credit scores above 620
Older borrowers, with the average age of delinquent borrowers rising from 38.6 to 40.4 years old
Older millennials who are struggling most with resumed payments
Prospective homebuyers with damaged credit scores

What action is being taken

The U.S. Department of Education's 12-month "on-ramp" period has ended, resulting in missed payments now being reported to credit bureaus
Credit bureaus are reporting student loan delinquencies, causing significant credit score drops
Financial experts are advising borrowers with damaged credit to take gradual steps to rebuild their scores
Lenders are adjusting interest rates based on borrowers' decreased credit scores

Why it matters

Credit score drops disqualify many borrowers from traditional credit cards, auto loans, and mortgages
Those who qualify face significantly higher interest rates (e.g., 7.89% vs. 7.07% for a mortgage with a $300,000 loan, potentially costing $60,000 more in interest)
The minimum credit score for a conventional mortgage is 620, putting homeownership out of reach for many
Student loan delinquency disproportionately affects older borrowers
Total household debt continues to rise despite decreases in certain non-housing debt categories
Aggregate delinquency rates have increased to 4.3% of all outstanding debt

What's next

No explicit next steps stated in the article

Read full article from source: The San Diego Voice & Viewpoint