U.S. Student Loan Defaults Reach Record Levels After Pandemic Payment Pause Ends

The Federal Student Aid office reports that roughly 9.5 million borrowers – one in five of those with federal student loans – are now in default, meaning they are more than nine months behind on payments. The surge follows the end of a pandemic-era pause that had prevented defaults while payments were suspended.

The pause, instituted by the Education Department during the COVID-19 crisis, was extended by the Biden administration for a year and ended in the fall of 2024. Since payments resumed, the default count has climbed from 5.3 million to the current level, with $233.3 billion of the $1.7 trillion federal loan portfolio in default.

The Trump administration has eliminated the Saving on a Valuable Education (SAVE) income-driven repayment plan, replacing multiple repayment options with a single standard plan and one income-driven alternative. Officials say the change is intended to simplify a “fragmented and confusing” system, but critics warn it could increase monthly payments for borrowers previously enrolled in SAVE.

States with the highest default rates are concentrated in the South, with Mississippi leading at 28.3 %. Other states in the top tier include Louisiana, Alabama, West Virginia, Oklahoma, Georgia, South Carolina, Texas, Alaska, Arizona, Ohio, Indiana, Michigan, New Mexico and Nevada. Puerto Rico reported a 30.9 % default rate, the highest among U.S. jurisdictions.

Borrowers from for-profit colleges face higher delinquency, with 33 % more than 90 days past due, more than double the rate for public-school alumni. The Office of Federal Student Aid notes that schools with the highest nonpayment rates are predominantly for-profit institutions.

"Folks are struggling to make ends meet and cover all the rising costs of everything else. The growing student loan bills are making things worse and folks are falling behind," said Aissa Canchola Bañez, policy director for Protect Borrowers.

"These are folks who live in states that President Trump won in the previous election," Bañez added, noting a misconception about the demographic profile of borrowers.

"We take it seriously. It's a real problem," said Jason Altmire, head of the Career Education Colleges and Universities association, referring to concerns raised by private trade schools.

The Education Department has warned that further defaults could rise if borrowers cannot meet higher monthly obligations under the revised repayment structure.