Summary of What is Happening:
🎓 Student Loans — Transitioning Out of CARES Act Forbearance
March 13, 2020:
All federal student loans were placed in automatic forbearance.
No payments are required, there is 0% interest, and there is no impact on credit.
After Sept. 2023:
Interest resumed.
Missed payments are now reported as deferred.
Sept. 2024 – Payments Officially Due:
1st missed payment: 30 days late →No credit impact
2nd missed payment: 60 days late →No credit impact
3rd missed payment: 90 days late →Now reported as a 90-day late payment
Clients may think they still have time, but that third missed payment can seriously damage credit. Be sure they know what’s coming.
Student Loans — Collections Restarting Soon
Starting May 5, 2025, the Department of Education will restart collections on defaulted federal student loans. This means
tax refunds, Social Security payments, and wages could be garnished.
We encourage your borrowers to:
Check loan status on the Federal Student Aid site.
Explore repayment options like income-driven plans or loan rehabilitation.
Act quickly to avoid financial penalties.
CARES Act - Quick Overview
The CARES Act was enabled March 13, 2020 as a result of the COVID-19 pandemic. This temporarily paused all eligible student loan payments and set the interest rate to 0%, and officially ended September 1, 2023.
Now that the payment pause has ended, you are responsible for paying both your loan principal and any unpaid interest.
Why am I now being reported as late?
When the CARES Act ended in 2023, servicers were allowed to collect interest again, but continued to mark the loans as deferred. Starting in late 2024, they removed the deferment verbiage and marked clients late after 90 days of no payments.
What is changing, when and how will this affect me?
On Feb. 18, 2025, a federal court issued a new injunction preventing the U.S. Department of Education from implementing the Saving on a Valuable Education (SAVE) Plan and parts of other income-driven repayment (IDR) plans. As a result, the IDR and online loan consolidation applications were temporarily unavailable.
However, as of March 26, 2025, the online IDR application is once again available for eligible borrowers to apply for the Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR) Plans. The online loan consolidation application is also available again.
How can this change my credit score?
A TransUnion analysis estimates that roughly 20% of the 19.6 million student loan borrowers are at risk of defaulting, excluding people in deferment or forbearance and private student loan borrowers.
On average, people who faced default lost an average of 63 points, TransUnion found, although those with higher credit scores were at risk of losing much more. Those with a credit score of 781 or higher could see an average credit score decline of 175 points due to impending student loan defaults.
Renters aspiring to become homeowners need education on dealing with credit score impacts if they default, down payment assistance programs and student loan-friendly mortgage options.
Federal Government Debt Collection
Q: What loans are included?
A: Any student loans that have entered default after 270 days of nonpayment.
Q: When does this start?
A: May 5th
Q: How will the government collection on this debt?
A: Wage Garnishment, Tax Refunds, Social Security Benefits
An expected 5.3 million people are currently in a default status with another 4 million that are 3 months behind on payments.
What Can I do to avoid this?
If you are not currently in default, past due or have recently been marked late for student loans on your credit report, you should work to get in touch with your student loan servicer ASAP!
Borrowers still have options to avoid the harshest penalties. One path out of default is loan rehabilitation - a process that requires nine consecutive on-time payments based on income and expenses. Betsy Mayotte, President of The Institute for Student Loan Advisors, noted that rehabilitation is a one-time opportunity, but for many, it offers a path back into good standing.
Loan servicers can guide borrowers through the rehabilitation process, but time is of the essence.
Resources
Federal Student Aid Website:
https://studentaid.gov/
Check the status of your Student Loans:
https://studentaid.gov/fsa-id/sign-in/landing/?redirectTo=/aid-summary/loans
Loan Simulator to compare repayment plans:
https://studentaid.gov/loan-simulator/
Apply for Income-Drive Repayment:
https://studentaid.gov/idr/
About Kurt Kessler
NMLS# 365130
(925) 400-3850
“Stay Humble, Hungry & Smart.”
I am a committed educator and advocate for the families and partners that I serve. I owe my best, always. I love helping my clients find the mortgage option that best fits their needs, keeping in mind their short and long term goals.
With over 30 years of real estate experience, I have been fortunate to have the opportunity to work with thousands of homeowners, assisting them with their financing needs. I feel that my longevity in the field allows me to bring a wealth of experience, knowledge, and know-how to my clients.
As one of California’s first state-licensed Real Estate Appraisers, I gained valuable knowledge into the real estate industry and the best possible tools for home buyers and clients with property needs. I graduated from San Diego State University in 1989 with a Bachelor of Science in Real Estate Finance.
I look forward to guiding you on the path to your next real estate transaction.
What Clients Are Saying
How to get an 850 Credit Score
A flawless 850 FICO® score unlocks the lowest interest rates, elite credit card offers, and top-tier negotiating power on loans. At BlueWater Credit, we’ve guided thousands to exceptional scores. Follow this step-by-step roadmap to elevate your credit profile and lean on our experts whenever you need help.
1. Assess Your Starting Line: Pull Your Credit Reports
Start with a clear picture of your credit history. Order your free reports from Experian, Equifax, and TransUnion at AnnualCreditReport.com. For full FICO® score monitoring, you can also check your scores through this MyScoreIQ link.
Review your reports for:
- Accounts you don’t recognize (possible fraud)
- Late payments or delinquencies
- Recent hard inquiries
- Public records like liens or bankruptcies
Keep copies of each report so you can track progress and catch any surprises early.
2. Build an Unbreakable On-Time Payment Streak
Your payment history makes up 35% of your score—the single most important factor. To keep it spotless:
- Automate all bills, from mortgage to utilities
- Set reminders at least two days before due dates
- Maintain a buffer in your bank account to avoid accidentally missing payments
A consistent record of on-time payments signals that you’re a low-risk borrower.
3. Crush Credit Utilization: Keep Balances Low
Credit utilization makes up 30% of your score. Aim to keep balances under 10% of your credit limits:
- Make multiple payments throughout the month
- Request credit limit increases periodically (but don’t spend more)
- Spread purchases across cards to avoid any single high balance
Low utilization shows lenders you use credit wisely—not excessively.
4. Cultivate a Healthy Credit Mix
Your credit mix accounts for 10% of your score. A balanced profile may include:
- Revolving credit (credit cards, lines of credit)
- Installment loans (auto, mortgage, student)
- Secured cards or retail accounts
Only open new accounts when they serve a purpose—too many new accounts can hurt more than help. If you’re looking to diversify your mix, explore current credit card offers here.
5. Preserve Account Age: Honor Your Oldest Accounts
Length of credit history makes up 15% of your score. Here’s how to maximize it:
- Keep old accounts open, even if unused
- Downgrade fee-based cards instead of closing them
- Avoid opening too many new accounts at once
Long-standing credit relationships show stability and reliability.
6. Minimize Hard Inquiries When Applying
Hard pulls can temporarily lower your score. Reduce their impact by:
- Bundling mortgage or auto loan rate-shopping into a 14-day window (FICO treats them as one)
- Using prequalification tools that rely on soft inquiries
Strategic planning keeps your credit momentum strong.
7. Monitor Regularly & Dispute Issues with BlueWater Credit
Even a small error can hold back your score. Stay proactive by:
- Signing up for credit monitoring to catch new accounts, inquiries, or delinquencies
- Contacting BlueWater Credit immediately if you spot anything inaccurate or suspicious
Our experts will handle disputes with the bureaus so you can stay focused on your goals.
8. Use Credit-Builder Tools Wisely
If you’re building or repairing credit, the right tools can speed up progress:
- Secured credit cards (backed by a deposit, but report like regular cards)
- Credit-builder loans (payments are held in savings and reported monthly)
- Authorized user status on a trusted person’s account
Use these products strategically and manage them responsibly to build trust with lenders.
9. Make 850 a Lifestyle, Not Just a Goal
Achieving a perfect score is impressive—but maintaining it is where the real power lies. Stick with your good habits: make on-time payments, keep utilization low, monitor your reports, and stay informed.
Barrett Financial Group, LLC NMLS #181106
© 2024 All Rights Reserved. Kurt Kessler NMLS# 365130 | Barrett Financial Group, L.L.C. | NMLS #181106 | 3207 Grey Hawk Court, Suite 110, Carlsbad, CA 92010 | CA 60DBO-46052 & 41DBO-148702 Licensed by Dept. of Financial Protection & Innovation under the California Residential Mortgage Lending Act. Loans made or arranged pursuant to a California Financing Law License | Equal Housing Opportunity | This is not a commitment to lend. All loans are subject to credit approval. nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/181106 -NMLS Consumer Access /Legal Disclaimer - This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Other limitations may apply. This site is not authorized by the New York State Department of Financial Services. No mortgage loan applications for properties located in the state of New York will be accepted through this site.