Personal Finance

Your student loans are on pause, but check your credit score

Key Points
  • Congress gave federal student loan borrowers a break from their bills until October.
  • In the meantime, their credit scores were supposed to go unharmed. 
  • That's not happening. 

In this article

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In normal times, not paying your student loans can crush your credit score.

During the pandemic, however, federal student loan borrowers were supposed to get a break from their bills, and their lenders were supposed to report their payments as on-time anyway. 

That's not how it's playing out. 

A class action lawsuit, brought on behalf of millions of federal student loan borrowers, alleges that Great Lakes Educational Loan Services inaccurately reported the payment status of millions of federal student loan borrowers, lowering their scores and jeopardizing their access to credit during a recession.

Some borrowers saw their scores drop by as much 100 points. 


The plaintiffs allege Great Lakes reported borrowers' student loans as "deferred," a status that suggests they can't meet the terms of their loan agreement. Congress required the Education Department to report the payments to credit bureaus as on-time.  

VantageScore, one of the major companies that provides credit scores, said it was making changes to its algorithm "to minimize the potential of any negative impact associated uniquely with the usage of forbearance and deferment codes." Of course, borrowers of all types have turned to these breaks for relief during the pandemic.

Great Lakes released a statement saying that it's working with the credit reporting companies to "ensure the accuracy of the information we reported regarding Covid-19 forbearances." It also said it doesn't believe its reporting has impacted consumers' credit scores. 

Yet the stories of borrowers with wounded scores continue to mount.