By Stacy M. Brown
Black Press USA Senior National Correspondent
The Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit reveals a sharp rise in total household debt, reaching $18.20 trillion in the first quarter of 2025. While some categories of debt, such as credit card and auto loans, experienced modest declines, student loan balances jumped by $16 billion to $1.63 trillion, with a notable surge in delinquencies following the end of federal student loan payment protections. According to the report, nearly six million student loan borrowers—representing about 14 percent—were 90 or more days delinquent or in default between January and March 2025. In total, 13.7 percent of borrowers were at least 90 days past due, while 23.7 percent were behind but not yet seriously delinquent. The figures are a dramatic increase from the previous delinquency rate, which had remained below 1 percent due to the years-long pause in federal student loan payments.
The payment freeze, initially introduced during the COVID-19 pandemic, lasted 43 months. Although payments resumed in October 2023, the U.S. Department of Education granted a 12-month “on-ramp” period during which missed payments were not reported to credit bureaus. That grace period ended in late 2024, prompting a flood of newly reported delinquencies in early 2025. The consequences have been swift and severe for millions of borrowers. According to the New York Fed, more than 2.2 million individuals newly marked as delinquent have seen their credit scores fall by over 100 points, while over 1 million have experienced drops of at least 150 points. These drops in credit scores threaten borrowers’ access to affordable financing options across the board.
“Your credit score is one of the most important numbers in your financial life,” Ted Rossman, senior industry analyst at Bankrate, told Newsweek. The New York Fed found the average drop for newly delinquent student loan borrowers was 177 points for those who had scores above 720. Borrowers with credit scores between 620 and 719 saw an average decline of 140 points, while those below 620 dropped by an average of 74 points. For many, the impact of these declines will reverberate for years. “There is very little in life that is more expensive than having bad credit,” said Matt Schulz, chief consumer finance analyst at LendingTree. “It can literally cost you tens of thousands of dollars or more over the course of your life.”
Newsweek noted that more than 2.4 million newly delinquent borrowers previously had credit scores above 620, making them eligible for traditional credit cards, auto loans, and mortgage financing. Falling below that threshold could now disqualify them from such products or saddle them with higher interest rates. The implications are especially dire for prospective homebuyers. The minimum credit score for a conventional mortgage is 620, and borrowers at that level currently face a 30-year fixed mortgage rate of 7.89 percent, according to Experian. In contrast, borrowers with a credit score of 780 pay 7.07 percent. For a $300,000 loan, that difference could amount to $60,000 more in interest over the life of the loan.
“Home prices and interest rates are already sky-high. Having less-than-perfect credit means that you may get stuck with an interest rate that’s even higher than the average,” Schulz said. “And, of course, a low enough credit score may mean that you don’t even get the mortgage at all.” Student loan delinquency also disproportionately affects older borrowers. The New York Fed reported that the average age of a delinquent borrower has risen from 38.6 to 40.4 years old. Delinquency rates are lowest among borrowers under age 30, indicating that older millennials—many of whom already face economic headwinds—are struggling most with resumed payments.
Non-housing debt fell overall by $38 billion, or 0.8 percent, in the first quarter. Credit card balances decreased by $29 billion to $1.18 trillion, and auto loan balances dropped by $13 billion to $1.64 trillion—only the second quarter-over-quarter decline since 2011. Other consumer loans, including retail cards, fell by $12 billion. Despite those declines, total household debt continued to rise due to increases in housing-related balances. Mortgage balances grew by $199 billion, reaching $12.80 trillion, while balances on home equity lines of credit (HELOCs) rose by $6 billion to $402 billion. HELOC balances have now increased for 12 straight quarters and are $85 billion above the low recorded in early 2022.
Aggregate delinquency rates also rose, with 4.3 percent of all outstanding debt in some stage of delinquency. While delinquency transitions remained stable for auto loans, credit cards, and other debts, student loans were the clear driver of the recent surge in overall delinquency. Experts advise borrowers who have damaged their credit scores to take gradual, responsible steps to rebuild. “It’s about doing the right things over and over, and unfortunately, a single major mistake can undo years of consistent work,” Schulz said. Rossman added that staying current on student loan payments and all other obligations is key. “Consider getting on a parent or spouse’s credit card as an authorized user or applying for secured credit cards and credit-builder loans,” he said. “Those are safe tools to help start the rebuild.”
