There’s a new credit warning for millions of Americans with student loans, especially younger borrowers. After a long pandemic pause, federal student loan payments have resumed — and so have the consequences for missing them.

Now that repayment plans are active again, buying cars, homes, or securing lines of credit could become harder, piling onto already high interest rates. Nancy Newman from New York’s Education Debt Consumer Assistance Program says many borrowers were blindsided when a temporary grace period ended late last year.

“They become three months or more delinquent and suddenly their credit scores are tanking,” Newman said. “I’ve heard anything from like 100 to 150 points, which is a lot.”

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Such a significant drop can shift credit scores from excellent to poor, just as borrowers begin careers or look to purchase homes.

One credit analyst notes that despite the risks, borrowers can still protect their scores by monitoring how their loans are reported.

“The thing to really be focused on is how they’re being reported by the servicer or the holder of that loan,” says Chad Rivlin with Consumer Credit Counseling Service of Rochester. “As long as they’re being reported as on time, that’s the primary concern that you want to focus on.”

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Both experts agree — don’t delay. If you’ve missed payments, contact your loan servicer immediately. You might qualify for a retroactive forbearance to limit the damage.

For more assistance, experts suggest visiting StudentAid.gov or contacting local non-profits in New York like EDCAP.

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