Roughly a million borrowers defaulted on their federal student loans late last year, with millions delinquent on their payments and sliding toward the same fate. That's according to federal data and the latest Household Debt and Credit Report from the Federal Reserve Bank of New York, which dropped on Tuesday. The report includes student loan data as of the end of 2025.
Student loan delinquencies have continued to worsen, said New York Fed researchers on a call with reporters, and they expect the number of borrowers in default to continue to grow.
The report offers further confirmation of a crisis in the U.S. student loan portfolio, in which too many borrowers are not repaying their student loans. Nearly 10% of student loan balances are more than 90 days past due, according to the report.
The stakes are high, not only for borrowers but for the broader U.S. economy. Americans in default can have up to 15% of their disposable pay garnished by the government. The government can also garnish income tax refunds and Social Security benefits. Borrowers' credit also takes a hit, making it much more difficult to buy a car or home or even rent an apartment.
This default wave "has very negative consequences for [borrowers]," says Jay Hurt, former chief financial officer at the Office of Federal Student Aid from 2008 to 2018. Hurt says it also "has negative consequences for institutions of higher education, and regions, and frankly has negative consequences for the economy in general."
What the numbers show
When student loan payments restarted after the COVID-19 pandemic, the government also eventually restarted the clock that ticks down on borrowers when they miss a payment. After 270 days of missed payments, a borrower is considered in default.
That means no borrower could newly default on their loans until last June, at the earliest. Since defaults resumed, the data has shown an inexorable slide of millions of borrowers through delinquency — like a downward escalator — and ultimately into default.
Federal data, up to Sept. 30, 2025, captures every phase of this escalator.
- The top and middle of the escalator: As of Sept. 30, 3.3 million borrowers were between 31 and 270 days late on their payments, in early and mid-delinquency.
- The last step before default: Another 3.6 million borrowers were about to step off the escalator — late enough on their payments (more than 270 days) that they were technically in default.
- Off the escalator and in default: 5.2 million Americans were in default as of Sept. 30, and most of them had already defaulted before the pandemic.
Hurt also flags a big wild card with all this math: A whopping 9.8 million borrowers, many of them low income and at high risk of default, are in what's called forbearance, meaning their payments are paused but their loans are accruing interest. That puts these borrowers at extra risk of slipping onto that escalator through delinquency to default.
In all, Hurt says, about half of all 43 million federal student loan borrowers are "at risk."
Why are so many borrowers not repaying their loans?
Theories abound, from high college costs, to the long pandemic payment pause, to borrower disillusionment after failed promises made by the Biden administration to forgive student debt.
One detail that stands out from the Federal Reserve Bank of New York's new data: Older borrowers (those age 50 or older) were more likely than any other age group to have loans transitioning into "serious delinquency," 90 days late or more.
The ripple effects of high default numbers
If the Department of Education returns to garnishing the wages and tax refunds of borrowers in default, Hurt says, it could lead to drops in consumer spending, new home sales, auto loans and more.
A recent report from Fidelity Investments, the 2026 State of Student Debt, found that "nearly one third (32%) of those currently paying off student loans have delayed purchasing a home due to their debt, and the percentage is even higher among Gen Z and Millennial borrowers – 37% and 36%, respectively."
This may be one reason the Trump administration announced in mid-January that it was delaying involuntary collections on borrowers in default.
"The Department determined that involuntary collection efforts … will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system," said Undersecretary of Education Nicholas Kent in a statement.
How to bring default numbers down
What kinds of improvements might act as guardrails at the edge of this default cliff?
Three letters: IDR. Income-driven repayment plans allow for borrowers' monthly payments to shrink or grow depending on what they can afford.
"Income-driven repayment is proven to be the best solution to get people out of trouble," Hurt says. As such, the Trump administration appears to have decided it doesn't make much sense to pressure defaulted borrowers into repayment until July, when Republicans' new IDR plan, the Repayment Assistance Plan (RAP), is scheduled to roll out.
Hurt says garnishing a borrower's wages or seizing their tax refund can be a powerful tool to compel that borrower to pick up the phone, call their loan servicer and ask: What are my options? And the Trump administration clearly didn't want these hard-to-reach borrowers finally asking that question before the RAP was a viable answer.
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