More Than 4 Million Student Loan Borrowers Are Likely on Their Way to Default

Millions of federal student loan borrowers are having difficulty keeping up with payments and heading towards default at record numbers.

Last quarter, about 4.12 million student loan borrowers were 181 to 270 days delinquent, according to the most recent data from the Department of Education. If those borrowers do not get current this quarter, almost 10% of all student loan borrowers will fall into default, which can lead to the garnishment of federal benefits or wages.

Before the COVID-19 pandemic, only about 500,000 student loan borrowers were typically this critically delinquent.

Borrowers Are Having Trouble Keeping Up

During the COVID-19 payment pause, which lasted from 2020 to 2023, borrowers did not have to make payments. After payments resumed, a grace period that lasted until October 2024 meant borrowers who opted in would not be negatively impacted if they did not pay.

That changed in February, when the grace period ended. Many borrowers have had trouble resuming payments because of the confusing and rapidly changing student loan repayment system. Student loan debt is flowing into serious delinquency faster than any other debt type, and older borrowers, in particular, are having the hardest time restarting payments.

Those who miss payments could see their credit score fall by 87 to 171 points, depending on what score they started with, according to an analysis by Apollo chief economist Torsten Sløk. Collections on defaulted loans and reduced credit scores make it even harder for borrowers to pay off their student loans and other debt.