**Student Loan Borrowers Face Credit Score Consequences as Payment Grace Period Ends**
Millions of Americans who borrowed money to fund their education are now at risk of damaging their credit scores. The 12-month “on ramp” to repayment, which allowed borrowers to miss payments without penalty, has expired. As of September 30, student loan servicers can once again report missed payments to credit agencies, which could negatively impact credit scores.
A recent survey by the National Endowment for Financial Education found that almost half of borrowers have made some payments since the end of the payment pause, but 26% have made no payments at all. Another report by Intuit Credit Karma revealed that 20% of student loan borrowers have not made any payments toward their student loans since the pause ended, and most of those borrowers are worried about the impact on their credit scores.
Experts warn that missed payments could have catastrophic consequences for credit scores. “When you don’t pay something for 4½ years, the intent is clear, you are not going to pay,” said certified financial planner Ted Jenkin. “Many believe that someone is going to bail them out, and I think it’s going to end badly for a lot of people.”
To avoid damaging their credit scores, borrowers need to develop a budget and figure out how to incorporate student loan payments into it. Consolidating other debts and reducing interest rates where possible can also help. However, many borrowers are still holding out hope for debt forgiveness, with 48% anticipating relief in the future.
The end of the payment grace period is likely to have a significant impact on borrowers’ budgets, with many having to make sacrifices to accommodate their student loan payments. In fact, 31% of borrowers said they are less likely to pursue additional education due to the end of the repayment pause.
The burden of student loan debt is not only affecting borrowers’ financial well-being but also their educational aspirations. A separate study found that 53% of U.S. workers said that knowing they would incur additional debt has prevented them from pursuing more education.
Consumer advocates stress the importance of understanding the earning potential of a degree and not borrowing more than expected starting salaries. “Higher education needs to do a better job of helping people understand the earning potential of a degree,” said NEFE’s Billy Hensley. “We need to talk through how to launch and what that plan looks like.”
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