In 2025, the average in-state tuition at a public university was closing in on $12,000 a year. That means someone will need close to $48,000 to graduate in four years — not including fees, room and board, books and other expenses.
To cover the cost of higher education, close to 40% of first-time college students take out student loans, according to the Federal Reserve. There's no credit score requirement for federal loans, but both they and private student loans can significantly impact your credit score.
Major changes approved in the One Big Beautiful Bill Act overhauled federal student loans, including eliminating Graduate PLUS loans, introducing borrowing caps for Parent PLUS loans and phasing out income-contingent-repayment (ICR) plans.
Compare student loan refinancing options
How do student loans work?
Student loans are a form of installment loan — the principal is repaid with interest in regular installments over a predetermined term. Federal student loans have fixed rates set by Congress, while private loans can have fixed or variable rates that can change over time.
Like most installment loans, you need to have a minimum credit score to be approved for private loans, and the application process includes a credit check that can temporarily lower your score.
Federal loans don't rely on creditworthiness, so applying won't ding your credit score. They also come with access to unique protections, including income-driven repayment plans, deferment and forebearance.
Federal aid can be in the form of Direct Subsidized Loans, where the government covers the interest while you're still enrolled or have recently graduated, and Direct Unsubsidized Loans, which begin accruing interest right away. There are also Direct PLUS loans, which are taken out by parents or guardians of dependent students and require a credit inquiry. (They also tend to have higher interest rates and fees.)
How do student loans affect your credit score?
Whether federal or private, student loans can have a positive or negative impact on your score.
How they can help your score
As a form of installment credit, a student loan can diversify your credit mix, which accounts for 10% of your FICO Score.
Your payment history accounts for 35% of your score, so making monthly payments on time helps boost your score.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.
Undergraduate and graduate students, parents, health professionals
$5,000 minimum (or up to state); maximum up to cost of attendance
5, 7, 10, 15, years; up to 20 years for refinancing loans
Terms apply.
Undergraduate and graduate students, parents
Amount varies by individual lender
Range from 5 to 20 years
Terms apply
How they can hurt your score
The amount of credit you're using versus your total credit limit, or your credit utilization rate, accounts for 30% of your score. So the more loans you take out, the lower it will be.
If you're delinquent or default on payments (meaning you're 270+ days late) or if your debt goes to collections, it can cause a major decline in your score. Federal student loan borrowers won't have delinquencies reported until they are 90 days past due. Private lenders decide when to report negative items, so there's no set timeline. So, if you anticipate missing any payments, contact your loan servicer right away to discuss your options.
A large debt load will increase your debt-to-income (DTI) ratio, which doesn't directly figure into your score but can hinder your ability to qualify for a credit card, mortgage and more.
How do student loans appear on your credit report?
Student loans are reported to Equifax, Experian, and TransUnion, the "Big 3" credit agencies, and listed as "installment loans."
If you were to get a copy of your report, you'd see;
- Whether it's a federal or private loan
- The original and current loan balances
- Your payment history
- Whether the loan is in repayment, deferment, forebearance or has been sent to collections
How to pay off your student loans faster
There are several strategies to pay off student debt faster, depending on your financial situation.
Enroll in autopay. Most lenders will give you a slight rate discount for setting up automatic payments. You also don't have to worry about accidentally forgetting a payment one month.
Make payments during your grace period. While you're not obligated to make payments during a grace period, it'll shorten your overall term.
Pay more than the minimum. If you have room in your budget, extra payments will also shrink your term and lower the amount of interest you pay over time.
Look into refinancing. Especially if you have private student loans, refinancing can get you a lower rate, making it easier to pay off your balance in full
FAQs
Does applying for federal student loans affect your credit score?
Because federal aid isn't based on creditworthiness, there's no credit inquiry and your score isn't impacted. If you're approved, the loan can impact your credit mix, credit utilization ratio and payment history.
How do student loans appear on your credit report?
Once the funds have been disbursed, both private and federal student loans will appear on your credit report under "installment loans."
How long will delinquent student loans appear on your credit report?
Delinquent or default student loans can remain on your credit reports for up to seven years.
Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every student loan article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of student loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
