Millions of Americans who thought student loan relief would last long-term are now facing a hard reality. When loan collections resumed in May, missed payments began to hit credit reports again.
While much of the focus has been on recent graduates, parents and grandparents who cosigned private loans or hold Parent PLUS loans are also at serious risk of credit-score damage.
If you’re in that group, it’s important to understand how student loans can affect your credit score, how a past due loan can hurt your credit and what steps you can take to stay ahead and protect your score.
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What borrowers and cosigners should know
Parent PLUS loans allow parents (and sometimes grandparents) to borrow directly for a student’s education, but the catch is that the debt sits squarely on the cosigner’s credit report.
There are nearly 3.8 million Parent PLUS borrowers, with outstanding balances soaring over $110 billion in recent years. If the student misses payments or if you co-signed a private student loan, your own credit score can plummet just as quickly either way.
A recent analysis from VantageScore shows that resuming student loan reporting led to credit drops of up to 129 points for delinquent borrowers, which can translate to serious financial setbacks for anyone depending on good credit for mortgages, refinances or a new loan.
How delinquencies impact credit scores
When a payment is 30 days past due, servicers may report the late status. Once it reaches 60 or 90 days, the hit becomes more severe. The New York Fed estimated more than nine million borrowers would see significant drops in the first half of 2025 when reporting resumed.
For older borrowers with established credit histories, a sudden 100+ point drop can disrupt plans like refinancing a mortgage, securing a home equity line or locking in favorable auto loan rates.
You might think, “I’ve managed credit responsibly for decades, surely a blip won’t matter.”
But, credit score shifts can trigger higher interest rates, additional fees or even outright loan denials. For example, a drop from near-800 territory into the mid-600s could increase mortgage refinance rates by a percentage point or more, potentially adding thousands in interest over the life of a loan.
Auto loans, insurance premiums and credit card approvals similarly hinge on credit tiers. Even if you’re financially comfortable, unexpected credit damage complicates reverse mortgages or big-ticket purchases. And since Parent PLUS balances often exceed $30,000 on average, the stakes are high if payments slip.
The importance of monitoring your credit regularly
The best defense is knowing in real time when your credit changes. Sign up for credit-monitoring services that alert you to score shifts or new negative entries.
Check your credit reports from the three bureaus at least once a year and ideally more often now that student loan reporting has resumed.
Many services also notify you if there’s a new inquiry or if a payment status changes. If you see any odd activity like a suddenly past-due status you don’t recognize, contact the loan servicer immediately to clarify or correct errors.
Repayment options and credit implications
Parent PLUS loans offer consolidation into a Direct Consolidation Loan, unlocking Income-Contingent Repayment (ICR), which can lower monthly payments based on income. But keep in mind that this option may extend repayment length and total interest paid.
Private loans vary by lender but sometimes allow refinancing if your credit is still strong and your income is steady. Although refinancing removes federal protections and forgiveness options.
If you anticipate you or the borrower you cosigned for having a tight cash flow, explore deferment or forbearance, but be aware these may pause payments temporarily while accruing interest and still risk credit impact when re-entering the repayment process.
Always weigh short-term relief against long-term credit health.
Communication and coordination with everyone involved
Open dialogue is key: set up a repayment plan where the student contributes if possible or at least commits to alerting you before a missed payment. You can also automate payments via autopay to avoid oversight.
Use shared calendars or notifications to track due dates. If you co-signed a private loan, consider asking the student to refinance into their own name once they have credit established, relieving you of risk.
The simple act of clear communication can prevent surprises that lead to delinquencies.
Steps to take if a payment will be missed
If you suspect a payment may be missed due to budget constraints or miscommunication, contact the servicer immediately. Discuss temporary options like short-term forbearance, but request clarity on how it will be reported to credit bureaus.
If possible, arrange a small one-time payment or extension to avoid passing the 30-day delinquency threshold. Understanding these options early can prevent a small hiccup from ballooning into a major credit event.
For Parent PLUS borrowers, consider consolidation into ICR as noted, or, if applicable, Public Service Loan Forgiveness (PSLF) after consolidation and qualifying employment. If private loans are part of the picture, refinancing should be tackled before credit slips too far.
Some families choose to make a lump-sum payment from savings or gift arrangements to bring accounts current. You can also review your options and brainstorm some next steps with a financial advisor as well for more help and clarity.
Bottom line
If you’ve cosigned a student loan or hold Parent PLUS debt, the return of credit reporting in May 2025 could put your credit at risk. Staying vigilant, communicating clearly and understanding your repayment options can help you protect your credit and avoid surprises.
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