Student loan delinquencies surge as credit reporting restarts
Add Axios as your preferred source to
see more of our stories on Google.
Student loan delinquency rates surged to a five-year high in the early months of 2025, the New York Fed said on Tuesday.
Why it matters: The data is among the earliest to show how Americans have fallen behind on student loan repayments since pandemic-era relief expired and delinquencies started to appear on credit reports.
- The spike was expected after artificially low delinquency rates in recent years.
- New York Fed researchers said the economic consequences for individual delinquent Americans could be severe, with higher borrowing costs that could shut them out of loan access. However, the impact on the overall economy would likely be more limited.
What they're saying: "After a five-year hiatus, student loan delinquency has returned to the pre-pandemic 'normal' with more than 10 percent of balances and roughly 6 million borrowers either past due or in default," researchers at the New York Fed wrote in a blog post.
- "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," they add.
By the numbers: Roughly 8% of aggregate student debt was at least 90 days delinquent in the first quarter of 2025, compared to less than 1% in the previous quarter.
- In a separate post on Tuesday, the New York Fed also calculated the share of borrowers with at least one delinquent student loan.
- About 14% of borrowers — or 6 million Americans — had a loan 90 days or more past due or in default, about the same share as in the same period in 2020.
Yes, but: Delinquency rates look slightly worse than pre-pandemic times when those who are not actually required to make payments are excluded.
- More Americans are in deferment or forbearance now, especially as litigation around Biden-era student debt relief plays out.
- Among those who are required to make payments, roughly 24% were behind on student loans in the first quarter, compared to 22% in the first quarter of 2020.
- "There's a world in which this could be kind of the bulk of delinquencies," a New York Fed researcher told reporters. "Some of these could cure once they see that their credit report has been dinged from it."
The big picture: The sharp jump in student loan delinquencies masks an otherwise upbeat snapshot of household debt. The New York Fed said that delinquency rates for credit card debt and auto loans had "leveled off" over the past year.
- Credit card debt declined — a typical pattern at the beginning of the year as consumers pay off debt racked up during the holiday season. But aggregate auto loans balances also fell, the first quarterly decline since the third quarter of 2020.
- Notably, New York Fed researchers say that the data does not capture consumers' rush to purchase cars in March to dodge tariffs, given the delay in loan reporting.
What to watch: The Treasury Department this month started collection efforts for defaulted loans — including garnishment of wages, tax returns and Social Security payments.
- "It is unclear whether these penalties will spill over into payment difficulties in other credit products," the researchers wrote in a blog post.
