Gravel crunched under the tires of Aaron Andrews’ minivan as he drove down the dark road that led to his new home. He peered through the cold rain and sleet falling on backcountry West Virginia and spotted a sign in the glow of his headlights: “MOBILE HOME PARK.” He pulled up to a gray double-wide trailer and got out of the car.
Andrews, a husky man in his 30s with a shaved head and a bushy orange beard, opened the rear hatch of his minivan and sized up the belongings crammed inside. He had stuffed his family’s clothes into trash bags and packed the rest of their things—dishes, toys, lightbulbs—in liquor boxes. His wife, Stacey, sat in the front seat with a microwave on her lap. Andrews picked up a hamper of dirty laundry and carried it to the trailer.
He walked through the front door and heard a pop, like the sound of a plastic hanger snapping, as a piece of trim broke off the doorframe and clattered to the floor. He took a deep breath. The noxious scent of latex paint overwhelmed him. He opened a few windows to air it out. He went to his sons’ room to assemble their beds—a twin frame for his 5-year-old, Elijah, and a crib for his 1-year-old, Caleb—and saw water damage on the ceiling, the stain hastily painted over but still visible. Loading dishes into the kitchen cabinets, he discovered that they weren’t made of wood, but cardboard. By then, the paint fumes had finally filtered out of the trailer, but another smell took their place: stale cigarette smoke and used cooking oil, a stench that seemed to seep from the walls.
A credit score is like a key, one that determines which doors in life are open to you, and which are closed.
Andrews’ hands and feet were numb from moving in the cold. The base of his neck ached, and it felt like a metal claw had clamped down on a muscle in his lower back. He lay down on his living room floor and stared up at a ceiling fan. He tried to pick out one of the blades and follow it with his eyes, but they all spun together in a blur. So did his thoughts. He wondered how he and his family would make it through the week. He had $45 to his name, and he wouldn’t get paid for six more days. He worried about how his 5-year-old would react when he saw the trailer. He remembered the water damage in his sons’ room; he’d have to find a way onto the roof and inspect it to make sure it wouldn’t cave in on his kids. It was getting late. He had to start moving, had to pick up his boys, had to make dinner. But he felt paralyzed. This can’t be our home, he thought. This can’t be our life.
Andrews had no choice but to move into that trailer. He wound up there for one reason: He had missed a series of student loan payments, and it destroyed his credit score.
He had tried to buy a house, but because his score was in the low 500s, every bank he approached for a mortgage turned him away. When that failed, he applied for four different apartments. Their landlords refused to rent to him. A mobile home in Martinsburg, West Virginia—95 miles from his office in Baltimore—was all he could afford.
These borrowers find themselves in a kind of financial exile—and because of the way credit reporting works in America, they have virtually no hope of escaping it.
Andrews is one of millions of Americans whose credit scores have been decimated because they fell behind on their student loan payments. An estimated 19 percent of America’s 46 million student loan borrowers—roughly 8.7 million people—missed at least one payment by more than 90 days between 2018 and 2020, leaving them with a delinquency on their credit reports, according to data compiled by Kristin Blagg, a senior research associate at the Urban Institute. And 2.6 million federal student loan borrowers missed 12 consecutive monthly payments between 2018 and 2020, placing them in default, according to data from the Department of Education. Even just one delinquency can cause a borrower’s credit score to dive. Twelve delinquencies will demolish it.
Photo of Aaron Andrews by Morgan Levy
When your credit score tanks, the fallout is brutal—something Andrews learned firsthand. He can’t open a credit card. He can’t lease a car, and he can’t get a loan to buy one. He can’t sign up for payment plans to make big purchases. He can’t take out a small business loan. He can’t consolidate or refinance any of his debts. He and his family exist on the brink of disaster: With little cash on hand, no savings, and no access to credit, they have no means of covering emergency expenses.
“Our financial life is held together with duct tape and shoe strings,” Andrews told me. “If there’s a weird shake or a jiggle in my car, or if a tooth hurts, or if one of my kids comes home from school and their shoe broke in half, I have to start racking my brain—like, OK, how are we going to do this?”
Andrews didn’t arbitrarily refuse to pay his student loan bills; he just couldn’t afford them. His wife has fibromyalgia, which has left the couple buried in medical bills and forced to buy costly medication each month. She’s in too much pain to work, making Andrews the sole earner in their family. When he first fell behind on his student loans, he did everything he could to get back on track: cashed in his 401(k), drained his savings account, sold off almost everything of value he owned, took on a second job, and started working seven days a week. But he still couldn’t scrounge up enough money to make his payments. In 2017, he defaulted. His credit score tumbled into the 500s, and it has languished there ever since.
Over the course of reporting this story, I spoke with borrowers who missed student loan payments because they got pregnant; because they got sick; because they lost a job; because they lost a loved one. Like Andrews, they fell behind on their loans during a difficult time in their lives, and they were punished for it, hit with delinquencies that drove their credit scores into the dirt. Years later, many of them still haven’t recovered. These borrowers find themselves in a kind of financial exile—and because of the way credit reporting works in America, they have virtually no hope of escaping it.
Photo of Meriel Schutkofsky by Morgan Levy
A credit score is like a key, one that determines which doors in life are open to you, and which are closed. A “very good” to “excellent” score (about 740 to 850) grants you access to low-interest, low-fee loans, and credit cards that come with high spending limits and generous rewards. With a “fair” to “good” score (about 580 to 739), you can likely get a loan, but at a higher interest rate, and a credit card, but with a lower spending limit and less attractive rewards. If you have a “poor” score (about 300 to 579), lenders consider you untouchable: You’re cut off from auto, home, and small business loans, as well as credit cards.
From there, a number of other doors slam shut on you. A poor credit score can prevent you from renting housing; about 90 percent of landlords run credit checks on their prospective tenants. It can also cost you a job. About 30 percent of employers run credit checks on applicants to some positions, and 16 percent run credit checks on all of their applicants. It can prohibit you from getting a cell phone plan with a major carrier, making you purchase a phone outright and prepay for service each month at a premium. By one estimate, a poor credit score can raise your car insurance rate by as much as 137 percent. And it can force you to send utility providers a security deposit before they will turn on your electricity, water, or gas. Those saddled with poor credit scores find themselves subjected to a different set of rules than most Americans, trapping them in a near-permanent underclass.
“We think about that social security card as being consequential,” Fred Wherry, the director of Princeton University’s Dignity and Debt Network, told me. “Forget your social security card. Your credit score gives you access to more things than that social security card does.”
For all the power credit scores wield over our lives, we know very little about how they’re calculated. Experian, Equifax, and TransUnion—the three major credit bureaus that generate our scores and reports—are for-profit, publicly traded corporations. The algorithms they use to determine our scores are proprietary. Almost no one has ever seen them, outside of a handful of employees at the bureaus and at FICO, a company that sells credit-scoring algorithms.
We have some idea of how these corporations calculate our scores, but only a rough one. FICO 8, the most widely used scoring model today, is based on five different factors: payment history (35 percent of your score), outstanding debt (another 30 percent), length of credit history (15 percent), mix of credit accounts (10 percent), and new credit accounts (the final 10 percent). While the bureaus use a number of different scoring models, they all hew closely to that formula—one that puts young student borrowers at an inherent and precarious disadvantage.
“The ways they tell you that you’re supposed to be building your credit—like paying your credit card on time—well, those aren’t options available to me anymore, because I can’t access those things. So now what?”
Coming out of college, most borrowers only have one or two types of credit (e.g., a student loan and a credit card), which penalizes them in the mix-of-credit category. Those lines of credit are fairly new, which hurts their length of credit history. And because they haven’t been financially independent long enough to have years of on-time payments behind them, even a single delinquency can wreck their payment history.
“It's especially hard on young people,” said Chi Chi Wu, a staff attorney at the National Consumer Law Center who focuses on credit issues. “If you just have one type of credit, i.e., student loans, you're not going to get as high a score. And then if you have a negative mark with that one type of credit, it just has so much more impact.”
Borrowers whose credit scores plummet after they miss student loan payments wind up in a catch-22. To boost their scores, they would need to open new, diverse lines of credit and pay their bills on time each month. But if they have a poor score, they can’t get approved for new credit—and without new credit, they can’t improve their scores.
Meriel Schutkofsky, a 26-year-old who lives in King of Prussia, Pennsylvania, has been stuck in that bind for years. After she missed three payments on her federal student loan, her credit score fell into the low 400s. At the time, she was making minimum wage as a cashier at a Rite Aid, despite graduating from West Chester University with degrees in psychology and social work. She hasn’t missed a loan payment since, but her credit score has barely budged.
“It's impossible to figure out what I can do to fix it, because I can’t get anything going,” Schutkofsky said. “The ways they tell you that you’re supposed to be building your credit—like paying your credit card on time—well, those aren’t options available to me anymore, because I can’t access those things. So now what?”
Photo of Xavier Long by Jarod Lew
On an August morning in 2012, Jerrika Romero, a 20-year-old college sophomore, found out she was pregnant. What should have been one of the best days of her life quickly became her worst. That afternoon, her boyfriend was diagnosed with osteosarcoma, a rare form of bone cancer.
Romero dropped out of college, and as a result, she started getting billed for her federal student loans, a $35,000 debt. Those bills were the last thing on her mind. She spent nearly all of her time and energy taking care of her boyfriend: scheduling his doctor’s appointments, picking up his prescriptions, and running around the Veterans Affairs Medical Center in Miami, where, as a former service member, he was being treated.
“All the focus went to him,” Romero said. “My whole pregnancy took a backseat.”
By October of 2014, Romero’s boyfriend had gotten severely sick, and he entered hospice care. Knowing they didn’t have much time left together, he and Romero got married in his hospital room. He died a week later.
In the wake of his death, Romero received about $100,000 from the VA. She wanted to use it to buy a house for herself and her son. But when she applied for a mortgage, she was denied. Amid the chaos of her pregnancy, childbirth, and her husband’s illness, Romero had missed six student loan payments. Her credit score had fallen into the low 500s.
“There's this narrative out there that credit reports and credit scores are some sort of measure of personal responsibility or morality. That’s really not the case. It’s really a measure, often, of just bad things happening to you.”
Romero, now 30, has seen her score tick upward over the years, but she can’t seem to lift it out of the 600s. She’s lived in her husband’s mother’s house ever since he died because she still can’t get a loan to buy her own home.
“There wasn’t a single bank that would tell me ‘yes,’” Romero said. “I’ve been trying to do this for seven years. And in the seven years that he’s been gone, I haven’t been able to do it because of the student loan, and because my credit keeps fluctuating up and down.”
I’ve spoken with a number of borrowers who, like Romero, didn’t just skip out on their student loan payments; they missed them because life got in the way. Xavier Long, a 30-year-old in Van Buren, Michigan, stopped paying his bills after he lost his job and couldn’t find a new one for a year. Marc, a 52-year-old in Portland, Oregon, defaulted on his loans during a deep depression, when he was contemplating suicide. (He asked to withhold his last name for his family’s sake.) Once Marc and Long’s delinquencies hit their credit reports, their scores plunged.
“My payment history just plummeted like crazy,” Long said. “By the time I got my job and I was like, ‘OK, I got money now, I can fix my life,’ the damage was already done.”
Credit scores are purported to be a reflection of what the bureaus call a person’s “willingness to repay”—their desire to make good on their debts, and their character as a borrower. But they don’t account for crises that derail borrowers’ lives. People born into wealthy families may be able to overcome those crises: They can turn to their parents to cover bills they can’t afford, allowing them to avoid delinquencies that would tarnish their scores. But borrowers from lower-income backgrounds often don’t have that option.
“There's this narrative out there that credit reports and credit scores are some sort of measure of personal responsibility or morality,” Wu, the National Consumer Law Center attorney, told me. “That’s really not the case. It’s really a measure, often, of just bad things happening to you.”
“The thing that fills that gap between borrower’s rights and their outcomes is a bunch of illegal business practices by student loan companies.”
Credit bureaus refuse to remove missed payments from credit reports regardless of why a borrower missed them. Borrowers can write letters to the bureaus explaining that they made a mistake when their husband was dying, or when they were let go from work, but they cannot be forgiven for that mistake. If a delinquency on a credit report is accurate, it remains there for seven years.
There are programs in place that should have kept the borrowers I spoke with from ever missing a payment. They could have taken forbearances or deferments, allowing them a temporary reprieve from making payments, or enrolled in an income-driven repayment (IDR) plan, which would cap their monthly bills at 10 to 20 percent of their income, even if that meant they were paying $0 a month. Federal student loan servicers—companies the government pays to collect on the loans it has administered—are supposed to talk delinquent borrowers through those options and help them get back into repayment. But many of the borrowers I spoke with told me their servicers didn’t do that.
At the time they missed payments, several said, they had never even heard of forbearances, deferments, or IDR plans. The servicers assigned to help these borrowers may have tried to call them or contact them by mail. But ultimately, the companies failed to reach them, and failed to get them out of delinquency before it was too late.
“If we knew that there were resources or counseling or something that was available, it might have been different. But we didn’t know what to do,” Andrews said. “We didn't know that there were options. We thought it was just: We can’t pay.”
Student loan servicers are notorious for shirking their obligations to borrowers and making it difficult for them to keep up with their payments. In 2015, the Consumer Financial Protection Bureau (CFPB) published a report outlining “widespread failures” among loan servicers. It found that borrowers were struggling to access basic details about their loans, getting conflicting information on repayment programs, and being steered away from IDR plans, among other issues. Two years later, the CFPB filed a lawsuit against Navient, a student loan servicer that handles six million federal borrowers’ accounts, including Andrews’ and Romero’s. While that case is still ongoing, in January, Navient settled a similar suit brought by 39 state Attorneys General for $1.85 billion. FedLoan Servicing, Nelnet, and Great Lakes—which, along with Navient, collectively service about 65 percent of all federal student loans—have also faced lawsuits for mishandling loans over the past few years. Most of them have yet to be resolved.
“There’s this disconnect between the rights that borrowers have under the law—to affordable payments, no payments at all, loan forgiveness—and the experience they have when dealing with the student loan system,” said Mike Pierce, the executive director of the nonprofit Student Borrower Protection Center. “The thing that fills that gap between borrower’s rights and their outcomes is a bunch of illegal business practices by student loan companies. If you are repaying student loans in that environment, which is like a lion’s den, you really shouldn’t be held accountable for missing payments here and there.”
Photo of Xavier Long by Jarod Lew
Credit reporting in America is almost entirely voluntary. For the most part, banks and other lenders don’t have to tell credit bureaus that a borrower missed a payment. They do so by choice, often as a tactic to pressure people into making a payment. Curiously, that’s not the case when it comes to student loans: By law, federal student loan servicers have to report missed payments to credit bureaus. No other type of lender is legally required to do that. I spent weeks trying to figure out why that is, poring through Congressional records and consulting more than half a dozen attorneys, historians, and other experts on student loans and credit reporting. Ultimately, I found that no one really knows why that law exists.
Up until the late 1970s, information about federal student loans didn’t appear on our credit reports; a provision of the Privacy Act forbade it. Over time, legislators grew concerned that borrowers were exploiting that protection and defaulting on their loans without consequence. Purportedly, tens of thousands of so-called “deadbeat” borrowers, many of whom were well-paid doctors and lawyers, were bilking the government out of millions in student loan debt they could afford to repay. That claim proved to be overblown: In 1978, fewer than 10 percent of borrowers were in default, most of whom simply couldn’t afford their payments because they were unemployed, underemployed, or came from low-income backgrounds. But in 1980, Congress passed a law to combat the supposed problem. Under it, those administering federal student loans had to tell credit bureaus if a borrower defaulted. Crucially, if someone merely missed a student loan payment—and even if they missed several—that information still didn’t show up on their credit reports, as long as they didn’t default.
In 1986, Congress amended the law. From then on, federal student loan servicers had to provide information about every borrower to the credit bureaus—regardless of whether that borrower was repaying their loans on time, delinquent, or in default. The new provision, contained in the Higher Education Amendments of 1986, did not exist when the bill was introduced in the Senate.
Why Congress made that change is a mystery.
Thirty-five years later, the law still hasn’t changed, forcing servicers to mangle borrowers’ credit scores when they miss payments, and wreaking havoc on millions of Americans’ financial lives in the process.
Shortly before the bill was signed into law, a group of senators and House representatives met behind closed doors to negotiate over the final text. By the end of their conference, they had added the new credit reporting provision to the bill. A conference report detailing what happened during those negotiations—which is the only record of what was said there—doesn’t explain where the new provision came from, or why legislators added it to the bill. All we know is that they did.
The new law put student loans in a class of their own: Pierce told me he doesn’t know of any other instance in which a lender is legally required to report missed payments to credit bureaus.
At the time, no one could have envisioned how much damage that law would do to borrowers who fall behind on their loan payments. When it was passed in 1986, credit scores didn’t even exist; FICO unveiled them in 1989. And credit reports weren’t nearly as ubiquitous as they are today. Landlords didn’t use them to determine if they would rent you an apartment; employers didn’t use them to decide if they would give you a job. Credit reporting looks vastly different now than it did back then—and yet 35 years later, the law still hasn’t changed. Instead of eliminating the problem it was designed to solve, it has created a new one: forcing servicers to mangle borrowers’ credit scores when they miss payments, and wreaking havoc on millions of Americans’ financial lives in the process.
Photo of Aaron Andrews by Morgan Levy
Soon after Andrews, the borrower in West Virginia, defaulted on his federal student loans, his paychecks suddenly shrunk. The government had begun garnishing his wages, seizing 15 percent of his income directly from his employer. He was already struggling to support his family on the $2,300 he brought home each month. Overnight, that dropped to $1,925.
“That almost destroyed us,” Andrews said.
At the time, Andrews had about $40,000 in student loan debt, a sum he didn’t think he’d ever be able to repay. It was a challenge just to keep the lights on in his trailer. Scrambling for a lifeline, Andrews contacted a few attorneys about filing for bankruptcy. They told him they couldn’t help him: Unlike almost every other form of personal debt, they explained, you can’t discharge student loans in bankruptcy.
Though it’s technically possible, it almost never happens. To do so, Andrews would need to prove his student debt subjected him to “undue hardship,” a vague and notoriously difficult legal bar to clear. Because it’s so challenging to demonstrate undue hardship, few people even try. According to an analysis by Jason Iuliano, an associate law professor at the University of Utah, 221,000 Americans with student loans filed for bankruptcy in 2019. Just 273 of them attempted to discharge their student debt.
Andrews gave up on declaring bankruptcy and pursued another tactic to get the government to stop garnishing his wages. In 2017, he enrolled in what the Department of Education calls “loan rehabilitation.” After he made nine consecutive monthly payments on his federal loans, he exited default. Getting there wasn’t easy. For the first five months, the government continued to garnish Andrews’ wages even as he paid his student loan bills. He had hoped that getting out of default might improve his credit score, but it hasn’t had much of an impact. Equifax, Experian, and TransUnion removed the notation indicating Andrews was in default from his credit reports, but his missed payments are still there.
Though lawmakers envisioned loan rehabilitation as a way for defaulted borrowers to recover from a huge blow to their credit scores, that’s not how it works in practice, Pierce explained.
“This is an example of Congress going back and saying, ‘Well, if we’re going to destroy people's credit, we should also give them a way out.’ And so they create this credit protection. But they do it in a way that doesn’t help anybody,” Pierce said. “It doesn’t take off your history of missing student loan payments, which are the things that actually destroy your credit.”
Andrews has kept his federal loan current since he rehabilitated it. Before the pause on federal student loan collections took effect in March of 2020, he was paying the government $250 a month. He’ll have to resume doing so when the pause, which the Biden administration recently extended, ends on May 1—or at least he’ll have to try. As of now, he said, there’s no way he could afford his monthly payments.
“It’s terrifying. I’m not going to be able to put food on the table if I get my paycheck garnished again.”
If he defaults again, he won’t have another opportunity to rehabilitate his loan. Borrowers can only do so once. The government would have a number of tools at its disposal to collect Andrews’ debt, from seizing his tax return, to garnishing his wages, to demanding the entirety of his outstanding balance immediately.
“They can basically take everything if they really want to, and there’s nothing stopping them,” Andrews said. “It's terrifying. I’m not going to be able to put food on the table if I get my paycheck garnished again.”
Andrews has no clear path forward. He can’t suddenly start earning more money. He can’t move into a more affordable home. He already sold off nearly everything of value he owned, depleted his savings, and cashed in his retirement fund. His only option is to spend what little money he has as frugally as he can.
Recently, Andrews’ nine-year-old son was accepted into a gifted program at school for math and science, but he’s had trouble doing his work on Andrews’ old, slow computer at home. Andrews doesn’t have enough money to buy a new computer outright, so he tried to purchase one from Amazon in installments. The retailer wouldn’t let him. He can’t sign up for a monthly payment plan, he was told, because his credit score is too low. He had to tell his son he couldn’t help him.
“That’s what kills me: It’s not just affecting me and my wife. It’s also having this generational effect on my kids,” Andrews said. “I don’t want to raise my kids in a mobile home for the rest of their lives. I want to get them out of here before middle school—before it’s sixth grade and they start getting shit because they get picked up from the trailer park bus stop.”
Beyond the necessities, Andrews can’t afford to treat his sons like the parents of their classmates—to buy them the latest toys and gadgets, or take them on big vacations. They have to bond within their means. One recent night, Andrews taught his boys how to chop wood. They built a bonfire in their backyard and watched stars sparkle in the sky above them.
“We try to teach our kids the value of these things,” Andrews said. “We’re not going out to the movies every weekend. We’re not riding ATVs. But I love this, and I love you guys. Even if the government and the loan companies take it all away, they can’t take that.”
Drew Schwartz is a staff writer at VICE. Follow him on Twitter.