As many as 1.4 million Americans could become seriously delinquent on at least one credit product in the next 12 months because of the financial pressure from student-loan payments, which resumed last month after a three-and-a-half-year pandemic freeze, the study found. Serious delinquency means a payment is overdue by at least 90 days. 

Analysts have been debating the impact on household finances and the economy as Americans resume student loan payments. There's already a squeeze from higher interest rates, which are expected to slow consumer spending and economic growth. What's more, some student borrowers have never had to pay back any college debt at all until now — and many took on new debts during the forbearance period. 

"There will be more consumers that have delinquencies as a result of this additional debt," said Liz Pagel, a senior vice president at TransUnion and one of the authors of the report. She said the knock-on impact of student payments is the issue that her clients in the consumer-lending business want to talk about most. 

Can't Pay, Won't Pay

Delinquencies were already on the rise even before the student freeze ended. 

About 3% of outstanding debt was in some stage of delinquency at the end of September, up 0.4 percentage point from three months earlier, according to the Federal Reserve Bank of New York. For credit cards and auto loans, delinquency rates are more than twice as high. Overall, 4.7% of consumers have at least some debt on their credit report that's in the hands of third-party collectors. 

Student loans are the type of debt that's most likely to become delinquent, but others will be affected too, according to the report. It predicts that as many as 600,000 credit-card users will likely become seriously delinquent on at least one of their cards in the coming year.

From a lender's perspective, government efforts to ease the transition back to student-loan payments will make it harder to assess household credit risks. The Education Department has barred federal student-loan delinquencies from being reported to credit agencies before September 2024. 

During the student-loan pause, only about one in four debtors made any payment, and fewer than one in 10 did so continuously. 

Some 55% of those who didn't pay said it was because they didn't have the funds, according to the TransUnion/BCG study — and 23% said they still can't pay now that they're required to. A further 23% said they'll only be able to stay current by taking steps such as finding a second job, or reducing spending. 

'Trying to Understand'

Meanwhile, during the three-and-a-half years when they didn't have to repay student loans, borrowers moved forward with their lives — and took on new debts like mortgages or auto loans, in a period that saw a surge in borrowing overall. 

The report finds that the expected increase in delinquencies "is likely manageable for the average lender's portfolio." 

Still, it warns that the unique circumstances of the pandemic freeze is adding to uncertainty over consumer credit — and lenders who have a lot of student-debt-holders on their books will have to "act with urgency" to adjust loss forecasts and underwriting strategies.

"Even sophisticated clients view this as unprecedented," said Ryan Curley, a managing director and partner at BCG. "They are trying to understand the implications."