Millions of student loan borrowers are in a precarious position. Federal Reserve Bank of New York data shows that as of Q3 2025, 9.4% of aggregate student debt is 90 or more days delinquent or in default.
While it’s easy to think of late payments as just another bill that slipped through the cracks, the consequences extend far beyond a phone call from your servicer. From your credit score to your ability to rent an apartment or buy a home, delinquency and default can create a cascade of financial obstacles.
What You Can Expect When You Don’t Make Student Loan Payments
Your Credit Score Takes an Immediate Hit
One of the most significant impacts of falling behind on student loan payments is damage to your credit score. After 90 days of delinquency on federal loans—it’s just 30 days for private student loans—your missed payments get reported to the three major credit bureaus, and the effects can be severe.
Research from TransUnion found that borrowers who became delinquent on their student loans saw their credit scores drop by an average of 60 points. For borrowers who had excellent credit, the damage can be even more dramatic—some saw drops of up to 175 points. That’s enough to push a score from the “excellent” range into “fair” territory, fundamentally changing your financial options.
With a credit score in the poor or fair range, you’ll have a harder time getting approved for credit cards, personal loans, auto loans, and other forms of consumer debt. If you are approved, you can expect to pay higher interest rates and fees.
These negative marks don’t disappear quickly, either. Late payments can remain on your credit report for up to seven years, even after you’ve brought your account current.
Renting an Apartment Becomes More Difficult
Your student loan payment history can create significant obstacles when renting an apartment. Most landlords run credit checks on prospective tenants, and a low credit score resulting from delinquent student loans can make you a less attractive applicant.
Landlords may view late payments as a red flag indicating you may struggle to pay rent on time. In competitive rental markets, this could mean losing out on your preferred apartment to applicants with stronger credit profiles. Some landlords may still approve your application but require a larger security deposit or a cosigner to offset the perceived risk.
Homeownership Dreams May Be Put on Hold
If you’re hoping to buy a home, falling behind on student loan payments creates multiple obstacles. Mortgage lenders use your credit score to determine not only whether you qualify for a loan but also what interest rate you’ll receive. A lower score can mean higher interest rates, potentially costing you tens of thousands of dollars over the life of your mortgage. You may even be denied outright.
Your student loans also factor into your debt-to-income (DTI) ratio, which lenders use to evaluate whether you can afford a mortgage. Even if you’re approved, a high DTI ratio may limit the amount you can borrow, forcing you to look at less expensive homes.
The Government Has Powerful Collection Tools
Beyond credit damage and housing challenges, defaulted borrowers face direct financial consequences through government collection actions.
Default occurs after 270 days of non-payment on federal loans. Once you reach that stage, the government can seize up to 15% of your disposable income directly from your paycheck without taking you to court. Your employer is legally required to comply, and the withholding continues until your loan is paid in full.
The government can also intercept your federal tax refunds through the Treasury Offset Program. If you’re expecting a refund, that money could instead be redirected to your student loan debt.
You Lose Access to Federal Benefits
When your loans enter default, you lose eligibility for additional federal student aid and access to flexible repayment options like income-driven repayment plans, deferment, and forbearance.
This can significantly impair your ability to get help with your student loan payments going forward.
Take Control Before It’s Too Late
If you’re struggling with payments, act before you fall too far behind. Student loan refinancing could help reduce your monthly payment by replacing federal loans with a new private loan at a potentially lower interest rate. ELFI offers personalized refinancing options with transparent terms and support from dedicated loan advisors.
