Student debt is hitting Gen Z especially hard.
A new FICO analysis found that the average American’s credit score decreased two points to 715 since 2024, down for the second year in a row as Americans grappled with inflation, high interest rates, and changes to student-loan repayment.
The analysis showed that younger consumers, in particular, saw increased financial strains. Gen Zers had an average credit score decrease of three points, marking the largest year-over-year decline of any group since 2020. More broadly, 14.1% of Gen Zers had a 50-point credit score decrease in the last year. FICO defined Gen Z as 18- to 29-year-olds because consumers cannot have a credit report until they are 18.
Credit scores influence a consumer’s access to loans like mortgages, and the better the score, the more likely it is that consumers will be able to get loans, rental applications, and higher credit limits approved.
“Gen Z consumers have had less time to build savings, and are less likely to benefit from stock market gains and home price appreciation,” the analysis said. “Instead, they are more likely to have affordability issues and more likely to face the impacts of higher interest rates and inflation.”
The analysis said that student loans play a significant role in the Gen Z data as well; 34% of the generation have open student loans, double the total population with open student loans.
FICO also announced in June that it would begin incorporating Buy Now, Pay Later loans into credit scores this fall. The analysis said that 29% of surveyed Americans said they relied on those loans to cover income gaps, suggesting credit scores could worsen as BNPL is taken into account.
Some Gen Z student-loan borrowers are entering repayment for the first time, and it coincides with a series of federal policy changes. President Donald Trump’s administration resumed collections on defaulted student loans in May after a five-year pause, meaning that borrowers who are delinquent on their student loans are subject to negative credit reporting. They could also default if they continue to miss payments, putting them at risk of wage garnishment and seizure of other federal benefits.
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Student-loan delinquencies are at record highs due to the policy changes. The New York Federal Reserve found that 10.2% of student borrowing was in serious delinquency, or more than 90 days past due, in the second quarter of 2025. FICO found that 6.1 million consumers with credit scores had a delinquency added to their records from February to April 2025.
FICO’s analysis said that Gen Zers are more likely to face volatility with their credit scores because they don’t have long credit histories and are less likely to make payments on time. This puts them at greater risk of facing the consequences of delinquency or default. But it’s not all bad — the analysis added that the generation has the most potential for score improvement by learning to make payments on time and keeping balances low.
Along with Gen Z, all federal student-loan borrowers are facing big repayment changes in the coming year. Trump’s “big beautiful” bill, which he signed into law in July, eliminated existing income-driven repayment plans and replaced them with two options: a standard repayment plan and a new Repayment Assistance Plan, which allows for loan forgiveness after 30 years.
It’s less generous than former President Joe Biden’s SAVE plan, which allowed for cheaper monthly payments and forgiveness after as few as 10 years of payments. Trump’s bill eliminated SAVE, and the 8 million borrowers enrolled in the plan can either switch to a new plan or remain on SAVE while interest accumulates.
FICO said that delinquencies “could increase even more than anticipated” due to the repayment changes.
“On the other hand, consumers could adjust to the new reality of needing to make student loan payments to prevent wage garnishments, collections, and other negative consequences of not making student loan payments,” the analysis said. “This could also potentially impact the payment hierarchy.”
Do you have student loans? Share your experience with this reporter at asheffey@businessinsider.com.
