Key Points
- Borrowers whose federal student loans were canceled from 2021 to 2024 saw credit scores rise an average of 17 points, according to a new study of credit records.
- Homeownership rose 1.2 percentage points on average and 2 points two years after cancellation, with about two-thirds of the gain from first-time buyers.
- The housing gains were concentrated among borrowers canceled in 2021, when mortgage rates sat near 3%, and the authors call their estimates an upper bound.
Borrowers whose federal student loans were canceled between 2021 and 2024 saw their credit scores climb an average of 17 points, according to a new paper on student debt cancellation (PDF File) released October 26, 2026. Their homeownership rate rose 1.2 percentage points over the four years after cancellation. Most of the relief the study captures came through Public Service Loan Forgiveness and the IDR account adjustment, two programs behind much of the $183.6 billion approved under President Biden.
The study was led by Eduard Nilaj of The Century Foundation and Protect Borrowers, with Marshall Steinbaum of the University of Utah and five co-authors. It uses the University of California Consumer Credit Panel, a 2% nationally representative sample of U.S. credit files.
The authors compare more than 28,000 borrowers whose loans were canceled against about 117,000 borrowers who still carried student loan debt and got no cancellation.
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Why It Matters
Many student loan borrower advocates have argued that student loan debt is a drag on the economy because it limits individual borrowers’ ability to spend on milestone purchases like a home. However, it’s been very hard to make that connection other than anecdotally.
This paper joins a short list of studies, including an NBER paper on borrowers who waited for forgiveness, that measure what relief policy does to real borrower credit reports.
The findings also show how a student loan balance stands in the way of a home purchase. Lenders count student loan payments in your debt-to-income ratio, and the authors say cancellation eased that ratio along with down payment savings and credit scores. The share of borrowers with a score of 700 or higher rose 7 percentage points from a base of 54%, crossing a cutoff lenders use for their best mortgage and credit card pricing.
What Changed After Cancellation
Cancellation lifted credit scores in all 15 groups of borrowers the authors tracked, with gains ranging from 12 to 22 points. Our breakdown of how student loans impact your credit score covers why the balance and payment record matter so much.
| Outcome | Before Cancellation | Average Effect |
|---|---|---|
| Credit Score | 701 average | +17 points |
| Share With A 700+ Score | 54% | +7 points |
| Homeownership Rate | 45.6% | +1.2 points (+2 at two years) |
| Credit Card Limits | Existing cardholders | +3.6% |
| Non-Mortgage Debt | Existing debt holders | No change |
| Delinquent Non-Student Debt | All borrowers | Down, not robust |
Credit card limits for existing cardholders rose 3.6%. Auto loans and other non-mortgage debt held flat, so the only debt that grew was mortgages taken out by new homeowners. About two-thirds of the homeownership gain came from first-time buyers, the purchase where the authors say debt-to-income limits for buyers with student loans bind tightest.
Why Did Later Borrowers See Smaller Housing Gains?
The explosion in the cost of housing, along with higher interest rates, explains much of the variation.
The groups of borrowers who received forgiveness in 2021 posted homeownership gains of 5.8, 4.4 and 2.1 percentage points, while the 2024 borrowers were close to zero. Those 2021 borrowers mostly fit the profile of Public Service Loan Forgiveness recipients with large, long-held balances, and their loans were canceled when the 30-year mortgage rate averaged about 3%.
Mortgage interest rates passed 7% in October 2022 and peaked near 7.8% a year later, which the authors say raised the monthly payment on the same loan 50% to 60%.
Borrowers who received cancellation from mid-2023 through most of 2024 looked different. They started with credit scores between 623 and 652, and 24% to 36% had a loan in collections. That profile matches the IDR account adjustment and discharges for students defrauded by their college. These borrowers posted the largest credit score gains, even though their housing gains were small.
What The Study Can’t Tell You
The authors call their estimates an upper bound. Their method flags canceled loans that clearly weren’t being paid down, so the borrowers studied were more strained than the average forgiveness recipient. The method found $74.3 billion in canceled debt, against $180 billion the Department of Education announced through 2024. Much of that difference comes from other loan forgiveness programs such as disability discharges and borrower defense relief.
It’s also important to note that an earlier 2025 NBER working paper followed borrowers for six months and concluded forgiveness did little beyond ending payments.
What Does This Mean For Borrowers Near Forgiveness?
For borrowers close to forgiveness, the study points to a financial payoff that keeps building after the balance hits zero. Credit scores jumped right away, and the homeownership effect kept growing for at least two years after the balance disappeared. Getting there still means avoiding the PSLF mistakes that delay a discharge.
This is even more important right now, as technical issues are delaying PSLF loan forgiveness processing for thousands of borrowers. The Public Service Loan Forgiveness tracker has not updated since July, and borrowers that have been hitting their 120-payment milestone over the last several months are reporting that their forgiveness is not being processed until the technical issues are resolved.
How This Connects
Student loan borrowers have seen their credit scores on a roller coaster over the last few years. Some borrowers lost more than 100 credit points in 2025 once servicers reported delinquencies again. This paper measures the reverse, what happens when the balance disappears for good.
The student loan forgiveness rules have also changed since these cancellations. IDR forgiveness may be taxable again starting in 2026, while PSLF stays tax-free. The July 1, 2026 overhaul also launched the Repayment Assistance Plan, which replaces most income-driven options over time.
What’s Next
This version updates a paper the team first posted in January 2025 (PDF File), now with up to four years of follow-up.
Watch the lawsuits over relief that was announced but never posted. The Project on Predatory Student Lending estimates about $4.6 billion of $23 billion in announced group discharges was still reported as owed four years later.
Borrowers covered by a group discharge should check that their balance shows zero, and our page on help for students defrauded by their college covers next steps.
Editor: Colin Graves
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