Record-breaking share of student loans marked delinquent, report says
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A graduate at a Georgetown University commencement ceremony in Washington, D.C., last year. Photo: Al Drago/Bloomberg via Getty Images
A record share of student loan debt is delinquent, according to new estimates by the New York Fed.
Why it matters: The data signals more stress on American consumers than previously known.
- Nearly one-quarter of student loan borrowers are estimated to have fallen behind on payments.
- The fallout could be a sharp drop in credit scores that makes it harder, and costlier, to get credit cards, auto loans and more.
Flashback: At the onset of the pandemic, the government said borrowers would not be penalized for missing student loan payments, while collections on delinquent debt were paused. Delinquent debt was marked as current.
- Federal student loans started accruing interest again in 2023. The government instituted an "on-ramp period" through September 2024 that froze notices to credit agencies about missed payments.
Zoom out: When student loan payments resumed, the share "of past due federal loans quickly returned to pre-pandemic levels," researchers at the New York Fed wrote in a blog post.
- About 16% of student loan balances were at least 90 days past due by the end of 2024, according to the economists' calculations. This is the Fed's "shadow delinquency rate," since the official data has not yet been released.
- That is a new high that translates into $250 billion in delinquent debt across nearly 10 million borrowers — 23% of the 43 million borrowers with outstanding balances.
By the numbers: About 63% of student loan borrowers have not reduced their balance since payments restarted in 2023, the New York Fed says — a hint that borrowers are not repaying their loans at the same rate as before the pandemic.
- The New York Fed estimates that 9 million student loan borrowers will see their credit score plummet in the first half of this year.
- After an extended reprieve, borrowers who miss payments risk a knock to their credit score that likely got a big boost during the pandemic forbearance.
Threat level: If current prime and subprime borrowers overwhelmingly miss payments, the overall drop in credit scores among student loan borrowers could be much larger — resulting in potentially less borrowing (and possibly less spending) among this subset of Americans.
- "This would result in reduced credit limits, higher interest rates for new loans, and overall lower credit access," New York Fed research economists Daniel Mangrum and Crystal Wang wrote in the blog post.
