Millions of student loan borrowers are falling behind on payments in 2025, triggering widespread credit score damage and federal collections actions. It’s the latest fallout from the end of the pandemic-era student loan pause, which lasted over three years.
Nearly 6 million borrowers now delinquent
According to the Federal Reserve Bank of New York, 13.7% of federal student loan borrowers—roughly 6 million Americans—were 90 or more days delinquent or in default by the end of Q1 2025. That’s only slightly below pre-pandemic levels of 14.4%, but marks a sharp shift from the artificial stability maintained during the payment freeze.
Another 23.7% are behind on payments by less than 90 days, placing them at risk of entering serious delinquency as economic pressures grow.
End of the “on-ramp” triggers credit damage
The Biden administration’s 12-month “on-ramp” period—which prevented missed payments from affecting borrowers’ credit—expired in October 2024. Since then, the financial consequences have intensified.
- Over 2.2 million newly delinquent borrowers saw credit scores drop more than 100 points.
- More than 1 million of those saw declines of at least 150 points.
- Even borrowers with credit scores over 720—previously considered super prime—have dropped by an average of 177 points.
Collections and garnishments resume
With defaults rising, the U.S. Department of Education has resumed collections activity, including:
- Wage garnishment
- Seizure of tax refunds
- Garnishment of Social Security benefits
These measures are hitting older borrowers especially hard. Data shows that at least 1 in 4 borrowers over age 40 are now more than 90 days past due—raising concerns about long-term retirement readiness.
Delinquency rising fastest in the South
States in the South are experiencing the highest rates of student loan delinquency. Mississippi, in particular, leads the nation in the share of borrowers with loans 90+ days overdue.
This regional disparity aligns with broader trends in income and cost-of-living challenges.
Credit access shrinking for millions
The spike in student loan delinquencies is creating ripple effects in the credit market:
- Borrowers with scores over 620 are now being locked out of auto loans, credit cards, and mortgages.
- The shift from “prime” to “subprime” credit status is occurring rapidly—often in just one or two billing cycles.
TransUnion data indicates that the shift has been “overnight” for many households. Borrowers are struggling to add payments back into budgets already stretched by higher rents, inflation, and other debts.
Who is still shielded from repayment?
Not all federal student loan borrowers are required to make payments yet. As of early 2025:
- Over 20 million borrowers remain in deferment, forbearance, or other non-repayment statuses.
- An estimated 5 million are enrolled in income-driven repayment (IDR) plans with $0 monthly payments.
Still, for the tens of millions now required to repay, missed payments are rapidly becoming a source of long-term financial damage.
What happens next?
The Department of Education has indicated that it will continue pursuing collections on defaulted loans. Borrowers seeking relief may explore options such as IDR enrollment, consolidation, or hardship deferment.
Financial experts advise immediate action for those at risk of falling behind. Ignoring the debt can lead to wage garnishment and long-term credit damage that affects job prospects, housing applications, and future borrowing.
For more information, visit the Federal Student Aid website or contact your loan servicer.
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