U.S. Student Loan Delinquencies and Defaults Are Soaring
The New York Federal Reserve released its 2025 First Quarter Report on Household Debt and Credit that showed mortgage debt up a big $199 billion, while consumer loans for auto, student loans and credit cards declined by $42 billion.
But the big story was the end of President Biden’s 43-month recess in student loan repayments, and additional one-year ban on disclosure of student delinquencies and defaults. The new data revealed that the number of student loan borrowers that are 90-days past due or in default, has risen from 5.3 million loans to 6 million loans.
The percentage of all student loans outstanding that are 90-days past due or in default has risen from 13.7% in the first quarter of 2020, to 14.4% in the first quarter of 2025. The state with the highest percentage of student debt 90-days past due or in defaultwas Mississippi at 44.6%, while the lowest percentage was Illinois at 13.7%.
California that is usually the biggest offender regarding government loans and benefits, had a relatively low 17.9% percent of student debt 90-days past due or in default.
Student loans are unique, because in any given quarter a large share of student borrowers are not required to make payments because they are currently enrolled in school, or have a deferment, forbearance, or other repayment agreement that requires zero-dollar monthly payments.
At the end of March 2025, there are over 20-million federal student loan borrowers that are not in repayment, plus 5 million borrowers that had a zero dollar monthly payment. As a resultof Biden’s 4-year delayed student loan payment scheme, the default rate is now lowest for those under 30 and highest for those over 40 years old, as shown below.
The average age of delinquent defaulted student loan borrowers has risen from 38.6 to 40.4 years old. In the first quarter of 2025, over 20% of all student loan borrowers are 90-days past due or in default, with those ages 40-49 approaching 30%.
With the Biden ban on reporting student loan delinquencies and defaults expiring in the first quarter of 2025, credit reporting agencies revealed the number of known delinquent or defaulted borrowers jumped by 3.2 million.
As a result of the expiration of the Biden ban on credit disclosures, about 2.2 million of the newly delinquent or defaulted student loan borrowers saw their credit scores fall by over 100 points and 1 million saw their credit scores fall by over 150 points.
The dramatic implosion of credit scores mean that almost none of the delinquent or defaulted borrowers will be able to buy a house, and the interest cost they pay to buy a car or have a credit card will go up substantially.