Americans’ Credit Card Debt Falls, But Past-Due Student Loans Drag on Credit Scores

As of early 2025, American consumers are experiencing a dual financial reality: credit card debt is decreasing, yet past-due student loans are significantly impacting credit scores. This complex landscape reflects the ongoing economic challenges faced by many households.

Credit Card Debt Declines

Recent data indicates a reduction in credit card debt, suggesting that consumers are becoming more cautious with their spending. This decline could be attributed to various factors, including higher interest rates, inflation concerns, and a general sense of economic uncertainty. Consumers might be opting for more cautious financial strategies, such as reducing discretionary spending and focusing on essential purchases.

Student Loan Delinquencies Surge

In contrast, student loan delinquencies have surged to a five-year high. Approximately 8% of student loan borrowers are now at least 90 days behind on payments, up from just 0.8% in early 2024. This sharp increase follows the resumption of collections and credit reporting in late 2024, after a five-year hiatus during the COVID-19 pandemic .

The resumption of these practices has led to significant credit score declines for millions of borrowers. Over 2.2 million individuals have seen their credit scores drop by more than 100 points, with some experiencing declines of up to 200 points .

Impact on Credit Scores

The resurgence of student loan delinquencies is having a profound effect on credit scores. The national average VantageScore 4.0 credit score is expected to decline by two points, from 702 to 700, by the summer of 2025 . For individual borrowers, missed student loan payments can result in score decreases ranging from 49 to 82 points on average .

These declines are limiting access to credit and increasing borrowing costs for affected individuals. The broader economic implications include reduced consumer spending, which constitutes about 70% of U.S. GDP, potentially dampening overall economic growth .

Steps Borrowers Can Take

For borrowers facing challenges with student loan payments, consider the following steps:

• Contact Loan Servicers: Reach out to loan servicers to discuss repayment options or deferment possibilities.

• Explore Income-Driven Repayment Plans: These plans adjust monthly payments based on income and family size.

• Seek Financial Counseling: Nonprofit credit counseling agencies can provide guidance on managing debt and improving financial health.

• Monitor Credit Reports: Regularly check credit reports for accuracy and dispute any discrepancies promptly.

The current financial landscape underscores the importance of managing both credit card and student loan debt. While credit card debt is declining, the surge in student loan delinquencies poses significant challenges. Borrowers must navigate these complexities to maintain financial stability and protect their creditworthiness.