They noted that typically, borrowers can exit default if they make nine on-time payments in a 10-month time period. Raphael Warnock wrote President Joe Biden a letter urging him to change the default status of federal borrowers. Last year, a group of Democratic lawmakers led by Massachusetts Sen. So far, the Department of Education hasn’t released many details on the change, but seemingly it will apply when federal payments restarts, currently scheduled for September 1. He adds that the potential credit score boost won’t be as dramatic for those with other negative marks in their credit history, like a default on a credit card or auto loan payment. “It could be really significant, especially for someone whose only blemish is a missing student loan payment,” says Rossman. Exactly how much a borrower’s score will rise depends on their individual financial circumstances.
Expunging the status could boost a borrower’s credit score by as much as 100 points, says Ted Rossman, senior industry analyst at Bankrate. The terms of default vary depending on the type of loan borrowers have, but for most federal loans it means that a payment has not been made in at least 270 days. An estimated 7.5 million borrowers could have their statuses wiped clean. The Department of Education said borrowers who were in default before the coronavirus pandemic will receive a “fresh start” when payments resume, with the black mark removed from their credit reports.
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