Student-loan defaults surge as pandemic relief ends and costs rise
Student-loan delinquencies hit 20% in May 2025, up from 15% in 2023, as borrowers faced rent, food and payment bills at once. Nearly one in three federal borrowers were at risk for default.
Federal Reserve survey data released in May 2025 put 20% of borrowers with student debt behind on payments, up from 15% in 2023, and 7% expecting to be delinquent within three months. Student-loan defaults are climbing again as the pandemic-era cushion disappears and household budgets remain squeezed by rent, groceries and childcare.
Federal Reserve survey data from May 2025 showed 28% of borrowers had student debt, while 32% of borrowers ages 18 to 29 said their payments were more than they could handle. That strain is showing up just as collection pressure returns, with federal student loan borrowers in default facing administrative wage garnishment and Treasury offset without a court order.
Congressional Research Service material posted on Congress.gov called a possible increase in federal student loan defaults in fall 2025 a “default cliff,” as temporary protections ended. TransUnion estimated in June 2025 that nearly one in three federal student loan borrowers were at risk for default after federal collection activities resumed.
Default can damage credit scores, make it harder to qualify for housing or car loans, trigger collection letters and, in some cases, lead to wage garnishment or tax refund offsets. For many borrowers, the problem is less about a single missed bill than a repayment plan that no longer fits their income, especially for lower-wage workers, recent graduates and older borrowers still carrying debt from degrees never completed.
The Education Department reopened the online income-driven repayment application on March 26, 2025 after pulling it down on February 21, and it completed its payment count adjustment in fall 2024 before beginning to display updated payment counts in January 2025. Federal Student Aid also posted a July 23, 2025 announcement on nonpayment rates by institution and default-prevention resources, while the department asked schools in May 2025 to provide repayment information for former students.
A 2025 survey from the Institute for College Access & Success showed borrowers were having to choose between rent, loans and food. Congressional Budget Office data from the 2009 to 2019 period show the share of loans in default during any given month rose from 4% one year into repayment to 12% after three years.
This article was produced by Prism’s automated news system from verified source data, official records, and press releases, then run through automated quality and moderation checks before publishing. The system is built and supervised by the people who set the standards it runs under. Read our full AI policy.
Did this article answer your question?
