Will My Credit Score Drop After Paying Off Student Loans

Updated on September 23, 2025

Your credit score often dips after you pay off student loans, but the decrease is usually small and temporary. This happens because closing an installment loan changes how credit scoring models evaluate your accounts and how your credit report reflects your active debts.

How Paying Off Student Loans Impacts Your Credit Score

Paying off a student loan can cause a short-term dip in your score. That happens because it reduces your credit mix and lowers the average age of your accounts.

Credit mix. Credit scores reward borrowers for managing different types of debt. When you pay off a student loan, you close an installment account. If most of what remains are credit cards, your mix looks less diverse, which can ding your score.
Credit history length. Scoring models weigh the average age of your accounts. Once a loan is paid off and closed, that average age can drop, which may lower your score slightly.

Both federal and private student loans are installment accounts, so paying off either type can cause this temporary dip.

How Much Will Your Credit Score Drop—and for How Long?

Paying off student loans can cause a short-term dip in your credit score. That happens because it reduces your credit mix and lowers the average age of your accounts.

Credit mix. Credit scores reward borrowers for managing different types of debt. When you pay off a student loan, you close an installment account. If most of what remains are credit cards, your mix looks less diverse, which can ding your score.
Credit history length. Scoring models weigh the average age of your accounts. Once a loan is paid off and closed, that average age can drop, which may lower your score slightly.

Both federal student loans and private student loans are installment accounts. Paying off either type can cause this temporary dip in your credit score.

Why Paying Off Student Loans Helps Your Credit in the Long Run

A brief score dip isn’t the full story. Paying off your student loans sets you up for stronger credit and better financial health over time. Here’s why:

Improved debt-to-income ratio. Without student loan payments in your monthly budget, your DTI drops. Lenders look at both your credit score and your DTI when you apply for new credit, so an improved ratio makes approval easier.
No chance of delinquency. Once the loan is gone, you eliminate the risk of late or missed payments—issues that drag down your score far more than a temporary dip.

On top of that, a paid-off loan remains on your credit report as a positive account for up to 10 years. Combined with a lower DTI and a clean payment history, these long-term benefits outweigh the short-term drop.

FAQs

1. Will paying off private student loans affect my credit score differently than federal loans?

No. Both federal and private student loans are installment accounts. Closing either type can cause the same small, temporary dip in your credit score because you’re reducing your credit mix and shortening your account history. The type of loan doesn’t change the effect.

2. How long does a paid-off student loan stay on my credit report?

A paid-off student loan usually remains on your credit report for up to 10 years as a positive account. That record continues to help your credit profile over time, even after the loan is closed, and often offsets the short-term score dip you may see right after payoff.

3. Should I avoid paying off student loans to protect my credit score?

No. The small, short-term dip in your score is not a reason to keep debt. Paying off student loans lowers your debt-to-income ratio, removes the risk of late payments, and adds a positive tradeline to your report—benefits that strengthen your credit long-term.

4. What can I do to speed up credit score recovery after payoff?

You can speed recovery by keeping credit cards open and active, paying balances down to lower your utilization, and making every payment on time. These habits show lenders you can manage credit responsibly, which helps your score rebound quickly after a student loan is paid off.