How Past-Due Student Loans Impact Credit Scores & What Borrowers Need to Know in 2025

With student loan repayments fully resumed, millions of borrowers are facing financial uncertainty. A recent New York Federal Reserve report highlights how missed student loan payments can severely lower credit scores, while an AP News report sheds light on the ongoing challenges borrowers face in repayment and loan forgiveness.

The good news? Income-Driven Repayment (IDR) plans are open for enrollment, offering a lifeline for struggling borrowers. However, the reality is that many borrowers attempting to enroll on their own end up with higher payments than necessary. That’s where LoanSense comes in.
We help borrowers secure lower student loan payments than they could on their own, ensuring their repayment plans set them up for homeownership and long-term financial success. Whether you’re a borrower trying to buy a home or a lender working with clients burdened by student debt, this is information you can’t afford to ignore. The Hidden Credit Score Consequences of Missed Student Loan Payments

A new New York Federal Reserve study underscores just how damaging missed student loan payments can be to a borrower's financial profile. Here’s what the data reveals:

• A single missed student loan payment can cause an average credit score drop of 60 points.
• Borrowers with a credit score under 650 see the biggest negative impact from missed payments.
• Unlike credit card or auto loan delinquencies, student loan delinquencies have a much longer-lasting effect on credit scores.

For borrowers looking to buy a home, this means more than just a number change—it could result in higher mortgage interest rates or even loan denial.

LoanSense Solution: We help borrowers enroll in repayment plans before they miss payments, protecting their credit scores and increasing their chances of qualifying for a mortgage with better terms. LoanSense can also send a templated letter to the servicer to ask that an erroneous or poorly timed communication on payment due dates be considered as the reason and to remove late payments reported to all credit bureaus.The Student Loan Repayment Crisis: Why Borrowers Are Struggling

A recent AP News report reveals that borrowers are still struggling to navigate the complexities of student loan repayment. Since payments resumed, common borrower challenges include:

• Confusion over repayment plan options, leading many to overpay on their loans.
• Inaccurate loan servicer guidance, leaving borrowers misinformed.
• Challenges accessing Public Service Loan Forgiveness (PSLF), even when eligible.
• High risk of delinquency and default, despite available relief programs.

IDR plans are open for enrollment, but here’s the catch: Many borrowers trying to enroll on their own receive repayment amounts higher than necessary, leaving them with payments they can’t afford.

This is where LoanSense steps in. We help borrowers navigate repayment programs and secure the lowest possible monthly payment, but not $0 if they are an FHA borrower, setting them up for success in homeownership and beyond. Why LoanSense Is a Game-Changer for Homebuyers & Lenders

The biggest roadblock to homeownership for borrowers with student debt isn’t necessarily their total loan balance—it’s their Debt-to-Income (DTI) ratio.

Many lenders incorrectly calculate student loan payments in underwriting, leading to unnecessary loan denials. Standard underwriting guidelines often require using 1% or 0.5% of the loan balance, which inflates DTI ratios and disqualifies borrowers from homeownership.
LoanSense provides a simple fix—we retrieve the Repayment Schedule Change Letter, an official document proving the borrower’s actual IDR payment. This allows lenders to use the borrower’s real, lower payment instead of an inflated estimate—helping more first-time buyers qualify.
Why This Matters for Lenders

• Close more loans by ensuring student debt isn’t unnecessarily disqualifying borrowers.
• Access real borrower payment data instead of relying on outdated underwriting assumptions.
• Help first-time homebuyers qualify, strengthening client relationships and expanding your market.

We’re hosting a webinar next Wednesday at Noon ET for our premium and enterprise lenders to discuss how LoanSense can help borrowers retrieve the necessary documents for mortgage underwriting.Take Action: Don’t Let Student Loan Debt Be a Barrier to Homeownership
Borrowers: If you’re planning to buy a home or pursue PSLF, don’t assume your servicer’s repayment offer is the best one available. LoanSense can lower your payment and help you qualify for a mortgage faster.

Lenders: If you’re seeing borrowers struggle to qualify because of student loan debt, LoanSense can help you close more loans by correctly documenting lower payments.
Want to help more borrowers become homeowners?