I've got student loans, for which I'm enrolled in the Pay As You Earn (PAYE) repayment plan. This means I'll only ever pay a maximum of 10% of my income towards these loans.

Given a relatively low income, this means that the interest accrued monthly is currently higher than what I'm repaying, so the balance goes up. However, all my payments are on time.

My question is: how much of an effect does my increasing student loan balance have on my credit score?

1 Answer 1


Having loans and paying them off based on the rules helps your credit score.

Having a loan balance eats into the amount of money a new lender can lend you.

Your credit score tells a lender how well you handle credit. A high score is great. The parts that makeup that score tell them: if you make your payments on time; if your are always flirting with exceeding your credit limit on your credit cards; if you are frequently applying for credit; and the mix of different types of credit you have; and how old they are.

The existing loans limit new lending. Your income determines how much debt you can afford. Your existing debt obligations reduces that number. A bad score reduces it again. A great score can even allow them some leeway.

Having a student loan balance, even one not in under PAYE, can make it harder to get a car loan, or a mortgage.

  • Thanks! So, just to be clear, you're saying that as long as I pay on time (even if those payments are small), it won't affect my score (as in the number), but it will affect how much I can borrow?
    – sacuL
    Mar 10, 2018 at 14:27

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