NEW YORK (AP) — Millions of Americans are seeing their credit scores suffer now that the federal government has resumed referring missed student loan payments for debt collection.

After 90 days of non-payment, student loan servicers report delinquent, or past-due, accounts to major credit bureaus, which use the information to recalculate the borrower’s score. Falling behind on loan payments can affect an individual’s credit rating as severely as filing for personal bankruptcy.

A lower credit score makes it harder or more expensive to obtain car loans, mortgages, credit cards, auto insurance and other financial services at a time when inflation, high interest rates and layoffs have strained the resources of some consumers.

The Federal Reserve Bank of New York reported that in the first three months of 2025, 2.2 million student loan recipients saw their scores drop by 100 points, and an additional 1 million had drops of 150 points or more.

Declines that steep may mean the difference between a manageable credit card interest rate and an unmanageable one, or approval or rejection of an application to rent an apartment.

The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during COVID-19 pandemic and resulting government shutdowns that impacted the economy.

Though payments technically resumed in 2023, the Biden administration provided a one-year grace period that ended in October 2024. Last month, the Trump administration restarted the collection process for outstanding student loans, with plans to seize wages and tax refunds if the loans continue to go unpaid.

According to the Federal Reserve Bank of New York, about 1 in 4 people with student loan accounts were more than 90 days behind on payments at the end of March.

Lenders, landlords, credit card companies, employers and utility companies all look to consumers’ credit scores to gauge the likelihood of borrowers being able to make regular payments. A higher score typically results in lower interest rates and more favorable loan terms, while a lower score makes it harder to access credit.

The Education Department has said borrowers should receive bills from lenders three weeks before any payments are due, but some people have reported that they have not been notified.

Wait times for calls with loan servicers have been long, and layoffs at the Department of Education likely also have contributed to delayed service, consumer advocates say.

Kevin King, vice president of credit risk at data and analytics company LexisNexis, said he expects the effects of the resumed student loan collections to begin rippling through the economy in the coming months.

King predicts that student loan payments will move higher in the so-called “payment hierarchy,” or the order in which consumers make payments, since the government plans to use “levers to compel” such as wage garnishment and the seizing of tax refunds.

“Which bill do you pay first, second and not at all?” King said. “Historically, student loans are really far down the list. But the government’s being pretty aggressive here in pursuing payment activity in a way that may shift the hierarchy. Consumers might be more willing to go delinquent or default on something like a credit card or installment loan.”

The Federal Reserve of New York study also found that borrowers ages 40 and older were most likely to be delinquent on their loans.