Student loan defaults rise sharply after pandemic freeze ends
More than 4.2 million borrowers entered default between April 2025 and March 2026 as payment suspensions expired, while additional borrowers face higher monthly payments under new repayment rules.
The number of federal student loan borrowers in default increased by over 4.2 million from April 2025 to March 2026, according to an analysis of federal data. The surge followed the expiration of a pandemic-era payment suspension and a one-year grace period that ended in fall 2024, after which loans could be sent to collections after nine months of missed payments.
The rise brings the total of borrowers in default to roughly 9.5 million, or about one in five of all student-loan holders, surpassing the previous record of 8 million in December 2019. Federal data also show 870,000 borrowers are between 181 and 270 days late, placing them near default status.
The increase coincides with the Education Department’s rollout of the SAVE plan and other changes intended to simplify repayment, but also with the dismantling of the most affordable income-driven repayment option. Critics say the new structure could raise monthly payments for many borrowers.
"I am seeing despair and outrage and despondency and just a very wide mix of pretty extreme emotions, the likes of which I have not seen before," said Alan Collinge, founder of Student Loan Justice.
Borrowers who fall behind for nine months risk wage garnishment, Social Security offsets and collection actions. A Moody’s Analytics report warned that garnishments could resume within a year, adding pressure to an already fragile economy.
Individual stories illustrate the broader trend. Ashley Dreahn, a former teacher who filed for bankruptcy in 2022, discovered that her student loans—thought to be discharged—had accrued to more than $94,000 with interest, placing her in default. She now hopes to qualify for Public Service Loan Forgiveness while working at a Texas prison.
Other borrowers, such as Barbara Howaniec of Maine and Shannon Khan of Texas, report confusion over shifting repayment plans and rising monthly amounts after being moved from the SAVE plan to other income-driven options.
The data also reveal disparities by institution type: about 33% of borrowers from for-profit schools are at least 90 days late, more than twice the rate for public-school borrowers. The Career Education Colleges and Universities association said it is launching a task force to educate students about repayment responsibilities.
Policymakers and consumer-advocacy groups are watching the trend closely as the federal government considers further actions to address the growing default rate and its impact on borrowers and the broader economy.