Student Loan Delinquencies Soar as Pandemic-Era Protections Expire

Student loan delinquencies spiked in the first quarter of 2025 as the federal government resumed reporting overdue payments to credit bureaus for the first time in nearly five years, marking the end of a pandemic-era pause on repayment of student debt.

The Federal Reserve Bank of New York reported on May 13 that the share of student debt that is 90 or more days past due surged to 8 percent, up from 0.8 percent in the previous quarter.

The sudden jump follows the formal expiration of a 43-month pandemic-era pause on student loan repayments that began in March 2020 and included an additional one-year “on-ramp” in 2023–2024 during which missed payments were not penalized. Once reporting resumed, a backlog of delinquent accounts was added to credit files, leading to the spike.

“Transition rates into serious delinquency have leveled off for credit card and auto loans over the past year,” Daniel Mangrum, Research Economist at the New York Fed, said in a statement. “However, the first batch of past due student loans was reported in the first quarter of 2025, resulting in a large jump in seriously delinquent borrowers.”

While overall delinquency rates across all household debt rose to 4.3 percent, up from 3.6 percent in the fourth quarter of 2024, the increase was driven almost entirely by student loans. Delinquency transition rates for other major categories—including mortgages, auto loans, and credit cards—remained stable.

With student loan delinquency returning to pre-pandemic levels, roughly six million borrowers are now either past due or in default, representing more than 10 percent of balances, New York Fed economists wrote in a blog post.

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The economists warned that the return of delinquencies is likely to have wide-reaching effects on borrowers’ financial lives, with many already seeing sharp declines in credit scores.

“The ramifications of student loan delinquency are severe,” they wrote.

“Millions of borrowers face steep declines in their credit standing, which will increase borrowing costs or seriously limit their access to credit, like mortgages and auto loans. It is unclear whether these penalties will spill over into payment difficulties in other credit products.”

Borrowers hardest hit by the resurgence in delinquencies are concentrated in Southern states, and older borrowers make up a growing share of those falling behind, the Fed noted.

Meanwhile, the end of pandemic-era protections also brought the restart of involuntary debt collections—including wage garnishment and the seizure of federal benefits—for borrowers in default.

The Education Department announced on May 5 that, beginning in June, it will resume involuntary collections by seizing tax refunds and federal benefits from 195,000 borrowers through the Treasury Offset Program. Later this summer, wage garnishment notices will be sent to an additional 5.3 million defaulted borrowers.

The department said the restart of collections was a necessary step to “restore common sense and fairness,” citing internal data showing that, within a few months, there could be almost 10 million borrowers in default.

The restart of enforcement follows the end of President Joe Biden’s push for mass student loan forgiveness, which aimed to cancel hundreds of billions in debt through executive action. That initiative was blocked in 2023 by the Supreme Court, which ruled that the administration lacked the authority to cancel loans without congressional approval.

In April, Education Secretary Linda McMahon said the department had abandoned blanket loan cancellation and would instead focus on restoring repayment discipline.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said in a statement.

“Going forward, the Department of Education, in conjunction with the Department of the Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”