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Impact of Student Loans

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Impact of Student Loans

I am one of the "lucky" many that have a literal ton of student loan debt. I took out about $55k and currently owe $91k. I've never defaulted or even had a late payment, I just spent most of my 20s completely broke and, therefore, unable to escape a cycle of deferment/forebearance/$0 Income-based payment rinse/repeat all while watching the interest add and compound until I owe nearly twice what I borrowed. I pay $400 a month now but that is less than the interest that acrues and my payment plan has Uncle Sam only paying half the unpaid interest each month so my balance keeps going up and will continue to do so for another 9 (if PSLF doesn't completely collapse) or 20-odd years.


I've tried finding information on this but I'm wondering what (if any) impact having a utilization roughly of roughly 165% (and growing!) in this area might be doing to my scores. The only other installment loan I have open is my car and I am just about to pay that off. My credit card utilization is very low - usually at 1-3% reporting on a single card each month. 

Community Leader
Valued Contributor

Re: Impact of Student Loans

Hi Gaia,
Sorry we got off to a rough start. I have to be careful when I get on right after work! 😵

I'm actually in a similar boat. Also one of the "lucky" ones, I was put on deferment forever until my servicer went out of business. I'm now about 1/4 into IDR forgiveness, which of course could have been over 50% had my first servicer just mentioned IDR (said the majority of borrowers!).
My loans are, of course, over 100% and >$50k. I was curious as to the impact on score. My current score is including 1 card over 8.9% (10%) and a 90 day late (which doesn't lose its impact over time) due to fall off after the new year. Other than 5 or so points for balance changes or an inquiry falling off, my scores are stagnant. So I asked the question on the forum here: how much was this loan costing my score.
I'll give you the link later so you can read the responses. You have to keep in mind that there is no difference between 100% and >100% from what I understand. The other thing is with student loans, as installment loans the thresholds are different than credit cards. You'd have to really make a dent in them to see any point gain.
I believe the general consensus was 20-30 point deduction for the high utilization student loans. Quite a few points, but not bad considering if you optimize all the other components of the score, it would be easy to get above an 800. You could take out another 2 credit cards to optimize that area, taking a temporary hit on average age and inquiries but honestly if it's not for a reason, why get more cards you don't need.
I don't think it's anything to worry about. It took a bit adjusting to for me l, but really once you're on the forgiveness path, your scores will take a hit until you're done. @Calyx

Message 2 of 6
New Contributor

Re: Impact of Student Loans

No rough start! I think we were just talking about two slightly different, but overlapping sides of the issue. All is well!

My scores are currently hanging out in the low 620s because last spring I (foolishly) thought that since my medical collections were nearly all paid and removed I should start building credit (all I had was student loans, car loans, and collections). With no idea how to do this I opened up nine credit cards (mostly store cardsand a few majors). Sigh.

Your answer is what I suspected. There's a ding but not one that can't be overcome with otherwise good behavior. Now I've just got to let these new accounts age and my ridiculously high inquiries fall off.

Message 3 of 6
Valued Contributor

Re: Impact of Student Loans

On time student loans are basically neutral in my experiences.


My wife has higher balances than you and scores over 800.

Rebuild started in 2014  -  $100k+ unsecured credit in 2017  -  $350k+ unsecured credit in 2020.


10% Rotating - Discover                       5%-20% - Amazon & Lowes                  3-6% Groceries - NFCU & Amex Preferred
3-5% Gas - NFCU & Ducks Unl            4% Dining & Entertain - Savor               3% Travel & Hotels - Flagship, Propel, & Uber
2% Everything Else - Flagship             1% Cancer Charity - Fifth Third             0% Finance Promos - Venture & QuickSilver

Message 4 of 6
Community Leader
Valued Contributor

Re: Impact of Student Loans

Found it. Max score of approximately 825.

So basically the credit cards are weighing your score down? Are these your FICO scores? Creditchecktotal has a 7 day $1 trial for a score and report from all 3B. It wouldn't hurt to see what they are now then see what happens when you make changes.
I still don't completely understand if AZEO includes installment accounts.... But maybe you could try that temporarily to fiddle with numbers.

Message 5 of 6
Senior Contributor

Re: Impact of Student Loans

^ What was previously said.


You aren't taking a ding on student loans having an overage of 100% so much as you're not getting the 20-30pts you could get from having a loan under 9%.  
IF the student loan is your only installment account, it's actually helping you more than it is hurting you because having an installment present is a huge help.

And I don't know if it's worth anything, but I track as much FICO information as I can, and going from >100%utilization to <70% doesn't seem to have helped my FICO at all, so far.    I did get a huge jump at the beginning because I had no installments.   Also, don't forget that installment accounts are only considered in aggregate (unlike revolvers), so although my UTI is at ~65% on my SL, my aggregate is ~78%, and that's the number people generally agree upon that matters (aggregate, not the 78%...).  Mortgages may be treated differently, but overall, the SL is probably more good than bad (clear as mud?)

EQ: 795 | EX: 785 | TU: 783 | Accounts: 2/6 6/12 10/24
Happy practitioner of AZE6or7or8
Message 6 of 6
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