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.
A credit score is like a key, one that determines which doors in life are open to you, and which are closed.
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.
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.
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.
“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?”
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.”
“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.”
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.
“The thing that fills that gap between borrower’s rights and their outcomes is a bunch of illegal business practices by student loan companies.”
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.
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.
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.
“It’s terrifying. I’m not going to be able to put food on the table if I get my paycheck garnished again.”