Millions of Americans Have Now Defaulted on Student Loans

Serious student loan delinquencies surged at the end of 2025 while overall balances climbed to roughly $1.7 trillion, signaling mounting distress among borrowers, the New York Federal Reserve reports.
Why It Matters
Millions of Americans hold student loan debt, and the rise in delinquencies shows that many borrowers are struggling to afford repayments now that the coronavirus pandemic-era relief has ended.
When borrowers fall into default, the consequences go far beyond missed payments. Wage garnishment and the loss of tax refunds or benefits can reduce household income, limit consumer spending, and strain local economies. At the same time, rising defaults can hurt credit scores, making it harder for people to rent apartments, buy cars, or qualify for mortgages, which can in turn slow economic growth at a moment when many families are already facing higher living costs.
What To Know
The New York Fed found in its latest Household Debt and Credit Report that student loan delinquencies jumped at the end of 2025, showing growing financial strain now that pandemic relief has fully ended. The share of student loan debt falling into serious delinquency surged to 16.19 percent in the quarter, up from just 0.7 percent a year earlier. That jump was far larger than in other major credit categories, such as mortgages or credit cards.
The Fed found that 9.6 percent of student loan balances were at least 90 days past due in the fourth quarter of 2025. That increase follows the resumption of payment reporting after the COVID-era pause, when most borrowers were not required to make payments.
What’s more, about one million borrowers who were more than 120 days behind were transferred to the U.S. Department of Education’s Default Resolution Group.
As of September 30, 2025, 5.2 million Americans were in default on federal student loans, with another 3.6 million at least 270 days late and 3.3 million between 31 and 270 days behind.
The report also shows that overall household debt continues to climb. Total U.S. household debt rose by $191 billion in the fourth quarter to $18.8 trillion, while student loan balances increased by $11 billion to about $1.66 trillion. At the same time, overall consumer delinquencies reached 4.8 percent — the highest level since 2017 — driven in part by financial stress among younger and lower-income borrowers.
Student Loan Changes
Student borrowers have been in limbo in recent years. From 2020 through 2023, during the Biden administration, U.S. student loan policy was dominated by pandemic-era relief. Federal payments and interest were paused for more than three years, and the Biden administration attempted broad loan cancellation for certain borrowers. The Education Department expanded targeted forgiveness through existing programs and introduced the SAVE income-driven repayment plan to lower monthly payments and prevent interest from ballooning for millions of borrowers.
But the Trump administration has changed that trend. New legislation rolled back most income-driven repayment plans for future borrowers, replaced them with a single income-based option with a longer path to forgiveness, capped how much students can borrow, and eliminated some graduate loan programs.
As payments fully resumed and federal collections were reinstated, the federal approach has moved away from broad relief and toward tighter limits and longer repayment timelines. However, the Education Department confirmed in January it has temporarily paused efforts to seize wages and tax refunds from borrowers in default on their student loans.