After a five-year pandemic-related pause in federal student loan repayment and a temporary grace period, the student debt crisis has returned—arguably more severe than ever. According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, nearly six million student loan borrowers—or 13.7 percent—are now seriously delinquent or in default on their loans. Even more troubling, nearly one in four borrowers required to make payments are behind, a figure masked by millions of others who remain in deferment, forbearance, or income-driven repayment plans requiring no immediate payment.
This dramatic increase in delinquency stems from the expiration of the federal "on-ramp" policy in October 2024, which had temporarily shielded missed payments from credit reporting after the repayment pause ended in September 2023. Now that reporting has resumed, the financial and personal consequences for borrowers are quickly becoming evident.
Delinquency by the Numbers
The NY Fed’s report reveals that while the total number of student loan borrowers has slightly decreased since 2020—from 44.6 million to 43.7 million—the number of borrowers behind on their payments is nearly the same. More striking is the conditional borrower delinquency rate—which excludes those without a current payment due. Among borrowers required to pay, 23.7 percent are delinquent, a reflection of a deepening affordability crisis and repayment system that continues to fail millions.
The burden is not equally distributed across the country. The highest rates of delinquency are concentrated in the South, with Mississippi leading at 44.6 percent, followed by Alabama, West Virginia, Kentucky, Oklahoma, Arkansas, and Louisiana—all states where more than 30 percent of borrowers with payments due are behind. In contrast, states like Illinois, Massachusetts, and Connecticut have delinquency rates under 15 percent.
An Aging, Struggling Borrower Base
Another notable shift is the aging of the delinquent borrower population. Delinquency is no longer confined to young graduates just entering repayment. Borrowers over age 40 now make up a significant portion of those falling behind, with more than one in four of these borrowers delinquent. The average age of a delinquent borrower rose from 38.6 in 2020 to 40.4 in 2025.
This is consistent with what higher education watchdogs have long observed: student loan debt is no longer just a young adult issue. Millions of older Americans—many of them parents who borrowed for their children or who returned to school later in life—are now in financial jeopardy.
Credit Damage and Economic Consequences
The return of delinquency has immediate and potentially devastating impacts on borrowers’ credit health. Over 2.2 million borrowers saw their credit scores drop by more than 100 points in the first quarter of 2025. Over one million borrowers suffered drops of 150 points or more.
Of those who became newly delinquent, nearly 44 percent had credit scores above 620 before missing payments—scores that typically qualify for auto loans, mortgages, and credit cards. These borrowers now face steeply increased borrowing costs or total exclusion from credit markets, potentially compromising their ability to secure housing, transportation, and even employment in some cases.
The cascading effects of damaged credit and rising debt may not be limited to student loans. The NY Fed warns that it remains to be seen whether delinquencies will spill over into defaults in other types of debt. This is especially concerning in a macroeconomic environment marked by high interest rates and increasing cost-of-living pressures.
Punitive Collections Resume
Adding to the pressure, federal collections have resumed. The U.S. Department of Education, working with the U.S. Treasury, began collecting on defaulted loans in May 2025, including garnishing wages, tax refunds, and Social Security payments. These harsh penalties, halted during the pandemic, are now back in full force—often hitting borrowers already in financial distress.
Millions of borrowers who once benefited from temporary protections now face permanent financial consequences, not only through collection actions but also through long-term credit damage.
A System Under Strain
The resurgence in student loan delinquency reflects not only the impact of resumed repayment but deeper systemic flaws in the American higher education and student loan systems. Despite well-publicized attempts at cancellation and reform, tens of millions remain trapped in a system that is neither affordable nor forgiving.
While much political attention has been directed toward one-time cancellation efforts and income-driven repayment plans, the growing delinquency rates suggest those efforts have not gone far enough—or fast enough. Borrowers in states with the highest delinquency rates tend to have lower incomes and fewer resources to navigate complex federal repayment options.
Without bold and comprehensive reform—including principal reduction, easier access to cancellation, and a robust safety net for vulnerable borrowers—millions of Americans will continue to suffer the consequences of educational debt they were told was an investment in their future.
The Higher Education Inquirer’s View
We see this resurgence in delinquency not simply as a data point, but as a clear warning. The Biden administration’s incremental reforms and the Supreme Court’s rebuke of broader cancellation efforts have left the most financially vulnerable exposed.
As wage garnishment resumes and credit scores plummet, student loan debt is quickly becoming a national emergency—especially for Black borrowers, older Americans, and those in the South and Midwest. These are not isolated failures. They are structural, policy-driven failures—decades in the making.
For the U.S. to truly address its student loan crisis, it must go beyond payment pauses and cosmetic fixes. It must confront the predatory aspects of its higher education financing system, the ballooning cost of college, and the promise that higher education is a guaranteed path to prosperity.
Until then, expect these numbers—and the pain behind them—to grow.
Sources:
-
Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, Q1 2025
-
New York Fed Center for Microeconomic Data Blog
-
Equifax Consumer Credit Panel data
