Do Student Loans Affect Credit Score and How? [2024 Guide]


Borrowing money to pay for your college education is a common occurrence. Just like with a car or mortgage loan, you are responsible for paying off your debts, interest included. Being a loyal installment payer, you will build a good credit score. This will make you more eligible for future loans and credit card applications.

The question remains, ‘Do student loans affect credit score?’.

To help you build a good report with financial institutions and ensure your credit score remains good, we’ll provide a guide to the following:

  • Do student loans affect your credit score?
  • How does a student loan affect your credit score?
  • Difference between federal and private student loans
  • Key factors to consider when you have a student loan
  • How to boost your credit score using your student loan
  • FAQs

Do Student Loans Affect Credit Score?

The simple answer is, “Yes, student loans do affect your credit score”. In the same way as any other loan, credit card, or debt will influence your FICO score, so will a student loan. While you are studying, your student loan might be in deferment. This means it is temporarily on pause, either because you are actively studying or because of other circumstances, like enrollment into military service. During this time it won’t have an effect on your credit score, even if it continues to accumulate interest.

After you finish your studies or military service, you are responsible for paying off your student debt. Failure to do so will have a negative effect on your credit score. We advise you to have a student loan repayment plan put in place before it starts having this negative effect.

Student loans affect your credit score when you don’t repay them on time. On the other hand, when you do stick to a repayment plan, student loans can actually boost your scores. There are still many other factors that influence your credit score. Read on to learn more about them.

How Do Student Loans Affect Credit Score?

There are many different types of credit scoring models, the most common one is the FICO scoring system created by the Fair Isaac Corporation. It uses a standard evaluating and quantifying method to determine someone’s creditworthiness. Your credit score ranges from 300 (poor) – 850 (excellent). Five things determine your score:

  • Payment History: 35% of the score
  • Amounts Owed: 30% of the score
  • Length of Credit History: 15% of the score
  • New Credit: 10% of the score
  • Credit Mix: 10% of the score

When it comes to student loans and credit score, the above-mentioned categories are applied in the following ways:

Payment History

When it is time to start paying off your student loans to lenders, you have to stick to payment schedules. Late payments can have a negative effect on your FICO score. Neglecting to meet payment deadlines can place you under defaulting or delinquent status.

When you are regularly late with payments, this is reported to the three major credit bureaus. This will ultimately have a negative effect on your credit score. Depending on the student loan companies’ terms and conditions, you might be subject to paying a late payment fee as well.

Amounts Owed

One of the other ways student loans affect credit score is by the total amount owed on them. When you’ve decided to continue your studies and you need to apply for an additional student loan or student loan refinancing, then the total amount you owe on your loan will add up.

You can be considered as a higher risk by loaning companies, to lend money to in the future, when you use a large percentage of your credit line. This includes the total amount of all student loans and credit cards.

Length of Credit History

Lenders will evaluate the history of your credit lines, bank accounts, and other loans. The longer you’ve had an open credit line, the higher your FICO score.

New Credit

It might be easy to apply for many different loan amounts and credit cards from different financial providers, but having too many lines of credit isn’t good for your overall credit score. Especially if you apply for multiple loans within a short period of time.

Credit Mix 

Your student loan can actually boost your credit score when you have a mix of credit lines including loans, credit cards, etc. Financial service providers evaluate past relationships with other credit providers to determine whether you are a loyal payee.

Do Federal and Private Student Loans Affect Credit Score the Same Way?

There are two different types of student loans you might consider: private or federal loans. There is quite a big difference between the two. Let’s take a closer look:

Federal Student Loans

In basic terms, a federal student loan refers to a loan provided by the government. It has certain sets of rules and regulations made by governmental law. The great thing about federal student loans is that it comes with many added benefits. These benefits include income-driven plans for repayment after studies and fixed interest rates.

Only some students are eligible and it’s much more difficult to get a federal student loan when compared to a private student loan.

Private Student Loans

Private graduate student loans are loans provided by credit unions, banks, state-based organizations, and state-affiliated organizations. All these organizations are private, which means all terms and conditions are set by the organization itself. Unfortunately, they typically have higher interest rates and fewer benefits.

Differences Between Federal and Private Student Loans

Do federal student loans affect your credit score the same way as private student loans? Yes. The way they affect your credit score is quite different though, because they have different terms and conditions.

Let’s look at some common differences:

Late Payments

Federal student loans have a 90-day waiting period before you are reported to the three major credit bureaus: Equifax, TransUnion, and Experian. This means that the financial lender gives you almost 3 months to contact them with an alternative arrangement or to settle the amount owed. If you don’t pay within this period, then your debt is reported to the credit bureaus.

Private lenders might report late payments as early as 30 days. This means that federal student loans offer more lenient conditions than private lenders.

Refinancing and Consolidation

The benefit of having a federal student loan is that it can be consolidated by changing it into a DCL (Direct Consolidation Loan). When you have trouble paying off your loan, consolidation will help you stay afloat.

A personal loan can’t be turned into a Direct Consolidation Loan. You will have to apply for refinancing. Remember that consolidated or refinanced student loans will appear on your credit report.

Payment Schedule

Federal student loans don’t require you to make any payments while you are busy studying. You’ll only start paying off debt after you graduate and start receiving your first income. Because it can also be adjusted to your monthly income, you are less likely to miss a payment.

Personal loans might require some down payments while you are still studying. Not having any income yet to pay off debt can cause late payments, which will ultimately have an effect on your credit score.

Postponing Terms and Conditions 

If you have trouble sticking to monthly payment schedules, a federal student loan will give you the option of temporarily postponing your payment. Or even lowering your monthly installments.

Private lenders have different terms and conditions when it comes to repayment and might not offer you so much flexibility. Without options to postpone payments or lower monthly installments, you’re more likely to miss payments and then student loans will affect your credit score negatively. You might also need to pay a late payment fee – adding on to your debt.

Factors to Consider About Student Loans

Looking at debt statistics regarding student loans, it is evident that US college graduates have billions of dollars of debt collectively. Even though this is a sad statistic, you can manage your student loan in a way that doesn’t affect your credit score negatively.

Here are a few things you need to consider if you have a student loan:

Paying off  Your Loan

When you are approved for a student loan, you should be wholly aware that you are going to have to pay it back in the future. It’s important that you have a repayment plan and not live beyond your means. Failing to stick to repayment agreements and installment plans will have a negative effect on your credit score.

Paying off your student loan earlier than the loan period might incur some additional penalties. Make sure you fully understand the terms and conditions of your loan. Missing payments is one of the most common reasons why student loans can affect your credit score negatively.

Applying for a Private Student Loan

When you apply for a private student loan to cover your college education, you can consider getting a cosigner. Cosigners, usually parents or guardians, can help students get better interest or variable rates. Especially if the cosigner has a good credit score, the student loan rates will be much better.

Such an arrangement shouldn’t be taken lightly though. If the student is unable to repay the loan, the cosigner will be responsible for the outstanding amount.

Impact of Debt

If you are wondering how do student loans affect credit score? Then the answer can be, quite a lot. Especially, if you don’t fully understand the impact debt can have on your credit and your future financial well-being. Taking out a loan shouldn’t be taken lightly. It’s important that you understand the rising interest rates and the total amount you will owe.

Consider the amount you are borrowing and whether you’ll be able to pay it back. Loans are investments in your future, but having a large debt that you cannot repay can affect whether you will be approved for future loans.

Student Loan Default

Carrying a large student loan balance without paying it back through monthly installments can put you in default. Not only is this bad for your credit score, but it can also cause many other penalties against you.

Federal student loans provide the lender with a 270-day past payment date before they put you on default. Private student loan organizations only give you 120 days.

How to Boost Your Credit Score With a Student Loan

When you manage your student loan correctly, you can actually build your credit score. This will help you in the future when you want to apply for a home loan, personal loan, or auto financing. Here are a few tips on how you can fix your credit score and improve it.

Consider Not Having a Cosigner

If it is within your means, you can skip having a cosigner completely. Yes, it will help you get lower interest rates, but if you are solely responsible for your personal loan it can be to your benefit.

Set Up a Good Credit History

What to do if student loans affect your credit score? When you are in a situation where your student loan has already affected your credit score in a negative way, you can start setting up a good credit history.

This means you should stick to timely monthly payments on all your credit cards, credit lines, and student loans. Continue making payments on time to set up a good credit history. Remember that inconsistency in payments will show up on your credit score.

Build a Good Credit Mix

Find an organization that can provide you with some of the best credit cards for students. This doesn’t mean that you have to max out your credit card within the first month. Having a credit card and making sure that you stick to small monthly installments will add a good credit mix to your profile.

Other options you can consider to add credit to your profile are an affordable mobile subscription plan or even a credit line account with another service provider.


Just like with any other loan, failing to repay your student loan will have a negative effect on your credit score. Before applying for one, you should be wholly aware of all the terms and conditions and have a future plan for repayment. Students can start building their credit scores even while they’re studying by setting up a good credit history, creating a credit mix, and not living above their means.

To avoid their account being put on default or reported to major credit bureaus, lenders should stick to on-time payments.


Do student loans affect your credit score while you are still in school?

This depends on the terms and conditions of your student loan. With federal student loans, you are only required to start making monthly installments after you’ve left school. Many private lenders might require you to start paying off debt while you are still in school.

Does paying student loans build credit?

Yes, making sure you pay your monthly installments on time will add credibility to your financial management and help build credit.

What happens if you never pay your student loans?

You might be subject to many different types of penalties including withheld tax refunds, wage, and social security payment garnishments from federal student loans. Private lenders can charge late payment penalties and increase monthly fees. On top of that, it will have a bad impact on your credit score.

Do student loans affect credit score?

Yes, when you stick to the terms and conditions provided by the borrower, it will have a positive effect on your credit score. On the flip side, if you don’t adhere to payments, it will have a negative impact.

Do student loans go away after 7 years?

No, loans don’t expire. Missing multiple monthly payments can put you in default and result in a very poor credit score.

1 Comment

  1. Perfectly pent subject matter, regards for information .

Leave a Reply