Student Loan Credit Repair: How To Rebuild Your Score

On Apr. 21, 2025, the Department of Education announced that it would resume student loan collection activity, which had been paused after the COVID-19 pandemic. For some student loan borrowers, the resumed payments can be so unmanageable that their loans free-fall into default.

According to a May 2025 analysis from TransUnion, 20.5% of federal student loan borrowers are delinquent on their loans by 90 days or more. This figure has nearly doubled since February 2020, just before the pandemic.

If you're one of those borrowers, you have options for credit repair. Learn how student loans affect your credit score and strategies to improve your credit in this guide.

Current student loan refinancing rates

How do student loans affect your credit score?

Your credit score is a three-digit snapshot of your past and current borrowing activity across all debt accounts. It uses a combination of factors in its calculation, including repayment history, amounts owed, and credit mix.

Each student loan you've taken out is tracked as a “tradeline,” or activity record, on your credit report. Positive loan activity, like making full and timely payments, affects 35% of your FICO credit score calculation. Unfortunately, that means that missing payments or defaulting on your loan has a sizable impact on your credit, too.

“One of the biggest mistakes borrowers make when addressing student loan-related credit damage is not considering the future,” says Tedis Baboumian, chief credit officer of Dovly AI, an app that helps borrowers fix and build their credit scores.

“Many borrowers enter these student loan agreements when they are young, naive, and uninformed. So when the future arrives and payments get tough, it's tempting to stop opening mail or answering calls from your loan servicer,” he continues. “But ignoring it can make things worse, and potentially lead to a default, which would be a major hit to your credit.”

Missed payments, defaults, bankruptcies, and collections are all considered “derogatory” marks on your credit report. Tradelines with this type of data suggest that you didn't repay your debt according to your loan agreement terms. Adverse payment activity has long-lasting credit effects and can stay on your credit report for up to seven years.

The same TransUnion analysis revealed that between October 2024 and February 2025, borrowers who were in student loan default saw their credit scores drop by 63 points on average. Depending on where your credit score stood before a default, this decline could be significant enough to knock your score down a rating (e.g., from “good” to “fair”).

Can student loan credit damage be repaired?

Whether you're hoping to prevent student loan credit damage, are at risk of it, or have loans that are in default, know that there are ways to get back on track.

“It's important that consumers don't become so overwhelmed with guilt that they bury their heads in the sand when financial hardship arises,” says Leslie H. Tayne, a debt resolution attorney at Tayne Law Group.

“Financial troubles strike a larger percentage of the population than they may think, so they should know they are not alone, and this is why there are options for consumers facing hardship,” she notes.

Some options offer almost immediate improvement, like reviewing your credit report and disputing any reporting errors. If you spot an error, reach out to the credit bureaus in writing, over the phone, or by submitting an online dispute. Alongside your dispute letter, include supporting documentation that can prove it's an error.

For example, if a student loan tradeline says you were late on payments, but during that period, your loan was in forbearance, provide documentation that shows the starting date of the forbearance.

Other options for credit repair after late student loan payments involve a longer timeline. Borrowers with defaulted federal student loans can request loan rehabilitation. You must agree to certain repayment conditions; in exchange, the default status is removed from your credit report, and you'll regain access to federal aid and benefits like deferment and forgiveness.

“It's also important that the consumer responsibly manages any other debt sums during this time by making on-time, consistent payments, with the goal of paying the balances off every 30 days before interest accrues,” says Tayne. “This will help uplift their credit score when dealing with student loan payment issues.”

What are the best strategies for student loan credit repair?

Borrowers who are experiencing student loan default, student loan collections, and credit damage can reach out to their federal loan servicer to learn more about their specific options. Here are some ways to manage student loans after adverse credit activity:

• Rehabilitating federal loans: Loan rehabilitation offers many advantages, like erasing a loan default from your credit record. It also reinstates your eligibility for different repayment plans, loan forgiveness, deferment, forbearance, and even new federal student aid.
• Consolidating federal defaulted loans: Repairing credit after student loan default with a federal Direct Consolidation Loan offers many of the same benefits as rehabilitation. The biggest difference is that consolidating defaulted loans doesn't expunge a default status from your credit report. In addition, capitalized interest and collection costs are added to your loan principal when you consolidate.
• Getting back on a repayment plan: Once your loans are back in good standing, exploring a new repayment plan, like income-driven repayment (IDR), might help make your payments manageable while you rebuild your credit. Enrolling in an IDR plan can also help you access student loan forgiveness.
• Making consistent on-time payments: Staying on top of your monthly payments will help with credit repair after making late student loan payments or entering default.
• Paying down other types of debt: Your student loans are just one account that makes up your total credit profile. Repaying other types of consumer debt, like credit cards and car loans, on time and keeping unpaid balances low accounts for 30% of your FICO score calculation.

How does student loan rehabilitation work?

Student loan rehabilitation can go a long way in repairing your credit after a student loan default. Depending on the type of federal student loan that's in default, the process can take nine to 10 months to complete.

Under a written agreement, your loan servicer will calculate a reasonable monthly payment that's either 10% or 15% of your annual discretionary income, and divide that number by 12. You must make full monthly payments within 20 days of the due date.

For Direct Loans and Federal Family Education Loan (FFEL) program loans, nine payments are required within 10 consecutive months; for federal Perkins Loans, it's nine payments within nine consecutive months.

After meeting the payment requirements, the default status is removed from your credit report. However, your credit history will continue to show the late payments that were reported before the loan went into default.

Can refinancing help improve your credit?

Student loan refinancing is another repayment strategy that simplifies repayment and might help improve your credit. Refinancing multiple student loans into one new loan will reflect the owed debt as one larger tradeline instead of multiple accounts. This can make repayment easier, since you only have to keep track of one monthly payment.

Refinanced student loans have a new interest rate and repayment terms. If your refinance loan payment is lower — because you qualified for a lower interest rate or chose to extend your repayment period — you might have more available cash flow to direct toward other debt, like revolving credit card accounts. This domino effect can ultimately improve your credit utilization if you pay down your credit cards faster, giving your credit score a lift.

A word of caution: Refinancing federal student loans makes you ineligible for federal repayment relief programs like loan rehabilitation, forbearance, loan forgiveness, and flexible income-driven repayment plans. Before moving forward with this credit repair strategy, carefully weigh the pros and cons to decide if student loan refinancing is right for you.