Do Student Loans Affect Credit Score?

Since university education is expensive, few people can afford it without a loan. Fortunately, student loans are available and usually have significantly more favorable rates than other types of loans. Unfortunately, they’re still pretty high, and it can be difficult to pay them off in the current job market.

That’s why our readers often ask: “do student loans affect credit score?”

The simple answer is yes; student loans affect your credit score the same way other loans do. If you want to improve your credit score for future loans, then you may want to continue reading this article as it will explain what student loans are, how they affect your credit score, and how that reflects on your credit report.

What Are Student Loans?

A student loan is a type of installment loan where you take out a lump sum of money and then pay it back in set payments over time until the student loan balance is paid in full. It allows students to pay for post-secondary education and the following:

  • Tuition
  • Stationery
  • Equipment
  • Student accommodation
  • Textbooks

There are three types of student loans:

  • Private student loans
  • Federal student loans
  • Refinance loans

Take a look at this next section to see what you need to apply and the average interest rates.

Private student loans

Private student loans are offered by financial institutions such as banks. It’s a personal finance option that allows you to apply for a student loan at any time without strict deadlines. To be approved for a private student loan, you may need to meet the following criteria:

  • Enrollment in an eligible school
  • Consistent income (you may need proof of income)
  • Meeting credit prerequisites and having a minimum score of 670
  • You’re 18 years or older

If you are under 18 and don’t have a regular income to prove that you can pay off student loans, you may need a cosigner. The cosigner will be responsible for the loan if you default.

Private student loans have lower interest rates, with the average variable rate ranging from 0.99% to 11.98% and fixed rates ranging from 1.49% to 12.99%.

Federal student loans

Federal student loans are provided by the government and have strict deadlines, so you can’t apply for them at any time. Student loan statistics show that 90% of student loans are federal loans. The average student loan interest rate for federal loans ranges from 3.73% to 6.28% and is set by congress annually.

To apply for a federal student loan, you can fill out the Free Application for Federal Student Aid (FAFSA). This form allows you to apply for scholarships, grants, work programs as well as federal student loans.

To get approved for a federal student loan, you must meet the following criteria:

  • You are a US citizen or an eligible non-citizen
  • You have a valid social security number
  • You’re enrolled in an eligible school

There are some benefits to federal loans that you can’t get from private student loans. For example, you may be able to get social work student loan forgiveness or tie your payments to your income when you graduate.

Refinance loans

After you graduate from college and you’ve made consistent repayments on your student loan, you may be able to apply for student loan refinancing. In this scenario, a private lender pays your student loan off and provides you with a new repayment plan with better terms. This usually includes lower interest rates or a longer repayment period.

To be eligible for student loan refinancing, you may need a FICO score of 690 or higher. In order to ensure your credit score stays high, you need to be timely with your student loan repayment plan.

Do Student Loans Show up on Credit Reports?

A student loan functions like any other installment loan — mortgage or auto loan, for example. That means it will show up on your credit report. Since student loans are usually substantial, they can have a major impact on credit reports.

If you take out a federal student loan, it won’t reflect on your credit report until after you receive your loan amount. On the other hand, private student loans will require a credit check that will reflect on your credit report.

Student loans on credit report documents will reflect on your credit report while you’re still in college and if you temporarily pause payments on your loan.

Both federal and private student loans will be removed from your credit report 7.5 years after your last payment. There are also ways you can remove student loans from your credit report, which we’ll explain further down the article.

How Do Student Loans Affect Your Credit Score?

Now that we know the answer to the question “do student loans affect credit score?” we should do a deep dive into how.

Firstly, it’s important to establish how a credit score is calculated so you can have a better idea of how a student loan can affect your score. Your FICO score is calculated by using data that are separated into five categories:

  • Payment history – 35%
  • Amounts owed – 30%
  • Length of your credit history – 15%
  • Any new credit you have – 10%
  • Credit mix (how many different types of credit do you have) – 10%

These scores are calculated using both positive and negative data taken from your credit report. The percentages show how important each section is in calculating your overall credit score.

Now that you know more about credit score calculation, let’s take a look at the importance of student loan debt and factors that affect credit score when taking out a student loan.

How student loans boost your credit mix

Although credit mix only accounts for 10% of your credit score, it’s still important. Having both revolving credit, such as a credit card, and installment credit, such as a car loan, can give your credit score a boost. If you pay your student loan off and it was your only installment credit, you may experience a slight dip in your credit score. However, you can opt for other types of installment credit and still maintain a good credit mix.

Student loans may lengthen credit history

The length of your credit history is also a part of your credit score calculation. Since student loans often have long repayment periods, having one can help you build an excellent credit report. But this will also depend on how well you manage your loan.

How defaulted loans affect your credit score

When you fail to make repayments for long periods of time, you can end up in default on your student loan, which can have a serious negative impact on your credit score. Paying off defaulted student loans can help improve your credit score, and it may improve gradually as your defaults get older.

However, if you’re a few days behind on payments it won’t have a serious impact on your credit report. On the other hand, if you’re 30 days or more behind on your payments for private student loans, it may appear on your credit report. Late repayments on federal student loans will be reported to credit bureaus after 90 days of not making payment.

What Happens If You Don’t Pay Student Loans?

You may find yourself in a situation where you’re unable to pay your student loan. Your student loans and credit score will be affected by this. If you’re in a financial rut, you may want to opt for a student loan deferment. This lets you postpone your repayments for up to three years. However, this doesn’t provide old student loan forgiveness.

But if you refuse to pay student loans for no reason, you may experience the following consequences:

  • Loan default: Failing to make repayments according to the terms agreed to in the promissory note means you’re in default. In some cases, your entire loan amount will be due, and it can lead to the repossession of personal property to pay off the loan.
  • Lowers credit score: If you fail to make student loan payments after several months, it will be reported to the major credit bureaus, and your credit score will drop significantly.
  • No future aid: You may lose future financial aid if you don’t pay your student loans. Your new credit score may make you ineligible for future loans, and defaulted loans affect your chances of receiving grants and scholarships.
  • Lawsuits: If you don’t dispute student loans with reasons as to why you can’t make repayments, you may face legal action. The lender has the right to sell your loan to a debt collection agency that may attempt to collect your student debt. Failing to settle it can result in a lawsuit.

How to Get Rid of Student Loans

As mentioned before, there is a way you can eliminate student loans legally without paying. However, none of these options are easy. For a federal student loan, you may be able to opt for forgiveness programs such as:

  • Forgiveness through income-driven repayments
  • Public Service Loan Forgiveness
  • Teacher Loan Forgiveness
  • Obama student loan forgiveness
  • Military student loan forgiveness

If you have a private student loan you may be able to get rid of student loan debt through bankruptcy. You’ll have to file for Chapters 7 and 13 bankruptcy and file an adversary proceeding lawsuit. Additionally, you’ll need a bankruptcy attorney, which can cost you a lot of money.

For both private and federal student loans, you can apply for total and permanent disability discharge. This is only available to students who are disabled. The student loan disability discharge credit report should state that you no longer owe the debt.

Wrap Up

As you can see, student loans can have a negative and positive effect on your credit score. If you make repayments on time, it will show that you are able to manage your loans effectively. But if you fail to pay your student loans and don’t adhere to the terms of your agreement, your credit scores will plummet, and you may face legal action.

When taking out a student loan, make sure you weigh your options and take out a loan that won’t harm your finances. Federal student loans have the most benefits and are more lenient with students when it comes to late repayments compared to private loans.

We hope that this article helped you with the information you were looking for on student loans and credit score reports.

You may also be interested in:
Marrying Someone with Student Loan Debt


When do student loans show up on credit reports?

Private student loans can show up on a credit report after the lender sends data to the three major credit bureaus. On the other hand, federal student loans won’t show up on your credit report until after students receive the loan.

How long can student loans stay on your credit report?

Student loans will stay on your credit report for 7.5 years after the last payment. Defaulted and delinquent student loans will appear on your credit report for seven years from the delinquency date.

Will paying student loans increase my credit score?

Yes, If you make regular payments on your student loans and you adhere to the repayment terms, your credit score may increase.

Do federal student loans affect credit scores?

Yes, federal student loans do affect credit score either by lowering or increasing your score. You can increase your credit score if you make your payments on time and you have a mixture of revolving and installment credit. But your scores can decrease if you fail to make payments after several months without providing reasons for your inability to make repayments.

How can I erase student loans from credit reports?

You can erase student loans from your credit report by disputing them as inaccurate. On the other hand, credit bureaus will automatically remove student loans from credit reports after 7.5 years. This won’t be a problem if you’ve managed to pay your installments during the course of your loan.

What if I can't pay my student loans?

This is what concerns most people wondering, “do student loans affect credit score and to what extent?” If you are unable to pay your student loan, you can try to apply for student loan deferment, which lets you postpone your repayments for up to three years. You can also contact your loan servicer and find a way to make affordable monthly payments.


Proudly South African, I have a history in psychology, as well as administration, but writing is my first love. I’ve been a full-time copywriter for four years and create SEO-friendly blogs, case studies, web content, landing pages, reviews, whitepapers, and more. Other than that, I enjoy helping people discover their potential through coaching, taking care of my two darling dogs, and saving the world one charity project at a time.

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