Student Loan Delinquencies Push More Renters into Subprime

Student loan delinquencies are impacting the rental market as property managers turn down applicants who are 90 or more days late on their student loan payments. 

The number of rental applicants with delinquent student loans more than doubled, reaching 31.4% in May, up from 14.5% in January, according to a TransUnion student loan repayment study. 

“The influx of applicants struggling with student loan payments could significantly impact property managers,” said Maitri Johnson, Executive Vice President of TransUnion’s tenant and employment screening business in a press release. “Applicants who once met screening thresholds are now falling short.”

Even applicants with previously solid credit records are seeing their credit scores fall.

Renters with prime credit, defined as those with credit scores of 661 to 720, are falling into riskier credit categories with 23% dipping into subprime, according to a TransUnion press release. Sixty-three percent of near prime renters, those with 601 to 660 credit scores, also fell into subprime.

Troubling Statistics

Student loan payments resumed in early 2025, and many borrowers are struggling to keep up with their payments which makes it difficult to be approved as a renter for an apartment or townhouse. Here are some worrisome statistics from a TransUnion ebook titled “Trapped by Tuition: The New Reality of Renting”:

• More than 2.2 million borrowers had their credit scores decline by 100 points or more in just a few months.  
• One in 3 borrowers making payments are now 90 days past due. 
• One in 5 student loan borrowers have stopped making payments altogether.

TransUnion urges property managers to reassess student borrowers as rental applicants.  

“These shifts mean your applicant pool is changing fast. Renters who looked financially solid six months ago may now trigger alarms in your screening system,” according to the TransUnion ebook. 

The Federal Reserve Bank of New York saw the trend of rising student loan delinquencies beginning in the first quarter of 2025. The statistics reveal that 7.74% of aggregate student debt was 90 or more days delinquent in the first quarter of  2025, up from less than 1% in the fourth quarter of 2024.

According to a 2024 study from the Consumer Financial Protection Bureau, student loan borrowers living in low-income areas are more likely to struggle to repay both their student loans and other types of credit.

Potential Renters a Fraud Risk 

Some applicants are turning to fraud to appear more welcoming to lenders. Renters who are under financial pressure may try to falsify credit and financial records or misrepresent their income. But there are things property managers can do to combat fraud among rental applicants.

“Multifamily-specific fraud detection tools can help verify identities, flag suspicious applications and prevent costly evictions,” the TransUnion press release advises. 

Risk Assessment Steps for Property Managers to Take

Property managers may wish to look beyond simple credit scores when evaluating potential rental candidates.  

“Traditional credit scores predict loan repayment, not rental performance. They overlook critical indicators such as eviction history and rental payment behavior. Property managers using purpose-built rental risk models can reduce exposure without shrinking applicant pools,” according to a TransUnion press release.

The Bottom Line

With so many student loan borrowers delinquent on their student loan payments and some borrowers resorting to fraud to present themselves as better rental candidates, property managers need to be on the alert. 

Fraud detection tools are useful for fighting fraud as is using risk models that look beyond credit scores and include eviction history and rental payment behavior to evaluate potential rental candidates.