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Delinquency rates soar as borrowers slow to repay student loans

By Danielle Douglas-Gabriel, The Washington Post

March 7, 2025, 10:55 am CST

One in five people who are supposed to be making payments on their federal student loans are more than 90 days past due, nearly double the percentage of delinquent borrowers since the pandemic hit and the government paused payments, according to the Education Department.

The Biden administration had allowed borrowers to ease their way back into repayment after a pause that lasted more than three years by offering a 12-month grace period, known as the on-ramp. People who missed payments during the on-ramp grace period did not face consequences such as negative credit reporting. But since the on-ramp ended on Sept. 30, millions of borrowers still have not been paying their bills.

Delinquencies are soaring as Republicans fight in court to end efforts that make student loan payments more affordable and loans easier to forgive. The ongoing legal battle has shut borrowers out of federal plans designed to help them manage their debt and stay out of default.

At the same time, borrowers needing guidance to get back on track could struggle to get help as the Trump administration seeks to gut the Federal Student Aid office and loan servicing contracts to save money. And without proper intervention, delinquencies could become full-blown defaults, putting borrowers at risk of having their wages garnished and tax refunds seized.

The number of people who are delinquent on their loans—4 million at the end of February—is twice as many as in 2019.

“This is a really critical period for default prevention,” said Sarah Sattelmeyer, project director for education, opportunity and mobility in the Higher Education initiative at New America, a think tank. “There needs to be sufficient money and staffing and resources in place to make sure we are preventing people from defaulting, which can have terrible consequences for their financial lives.”

A spokesperson for the Education Department blamed the rise in delinquencies on the Biden administration’s student debt forgiveness policies, saying, “Officials willfully ignored the American justice system that told them it was illegal at every step of the way and lied to student borrowers about the ramifications.”

Higher-education experts had warned that getting borrowers back in the habit of paying after a five-year break would be difficult. The government extended the pandemic moratorium on payments nine times from 2020 to 2023, during the Trump and Biden administrations, before thawing the freeze on collections. When bills resumed in October 2023, nearly 10 million borrowers did not make their payments, according to the Government Accountability Office.

A Federal Reserve Bank of Philadelphia study found that more than half of borrowers who did not make their full payment in October 2023 said they could not afford it, while others were contending with billing errors or simply chose not to pay.

Nearly 8 million people in total missed payments by the end of February—some are 30 days or 60 days past due, according to Education Department data obtained by The Washington Post. The department requires its student loan servicers, the companies that manage the government’s $1.6 trillion portfolio, to report late or missing payments to credit agencies after 90 days.

Last month, borrowers got a rude awakening when their credit scores began plummeting.

Justin McMahon, 33, said he learned his student loan payments had resumed after his bank notified him of a 140-point drop in his credit score last month. He discovered he was more than 90 days delinquent on payments for his $14,000 in student loans. McMahon said he never received any messages from his student loan servicer, Nelnet, saying that the on-ramp grace period was over. It turned out that calls from the servicer were flagged as suspect spam, so he didn’t answer, and emails from the company went directly to his junk folder, he said.

McMahon said he immediately paid what he owed, signed up for automatic payments and asked Nelnet to reverse the mark on his credit. But the company, he said, told him there was nothing they could do. McMahon plans to file a complaint with the Consumer Financial Protection Bureau.

“I acknowledge my responsibility to be on top of these things, but I would also like them to acknowledge that the last five years were unique and it wasn’t clearly communicated that we had to begin making payments again,” said McMahon, an operations manager at a health-care company in Florida. “I wish they would give people a little more grace.”

Nelnet spokesperson Ben Kiser said the company has to abide by federal rules on reporting to credit agencies. He said Nelnet and the Federal Student Aid office have “proactively communicated with borrowers in recent months, and the message has been covered extensively by the media.”

Borrowers at a variety of loan servicers are reporting dips in their credit scores. Rikard Bandebo, chief economist at VantageScore, said borrowers with high credit scores could see the biggest drops, which could take years to recover from.

Scott Buchanan, executive director of the trade group Student Loan Servicing Alliance, said servicers want to help borrowers avoid delinquencies and noted the companies are measured on delinquency rates and penalized by the department for poor outcomes.

“The last five years have conditioned borrowers to regrettably ignore being actively engaged in their loans,” Buchanan said.

The on-ramp came to a close at the same time as another critical program designed to help borrowers struggling with their payments. Until Sept. 30, the Biden administration had allowed anyone in default on a federal loan held by the department to bring their debt back into good standing through the “Fresh Start” initiative. Consumer advocates predicted that the end of both safety-net programs could result in a spike in delinquencies and eventually defaults, which takes 270 days of missed payments.

Before leaving office in January, the Biden administration outlined strategies for the Education Department to help borrowers avoid defaults as the agency planned to resume negative-credit reporting and collections. Among the recommendations was to automatically enroll borrowers who become 75 days delinquent on their loans in an income-driven repayment plan, which ties monthly payments to earnings and family size with the promise of loan forgiveness after 20 to 25 years.

Those affordable repayment plans, however, are temporarily unavailable. The department has stopped accepting and processing applications for all income-driven repayment plans since the U.S. Court of Appeals for the 8th Circuit last week expanded an injunction blocking former president Joe Biden’s Saving on a Valuable Education program, commonly known as Save.

The lack of affordable repayment options comes as the Trump administration looks to dial back customer service for borrowers to cut costs. In an email reviewed by The Washington Post and first reported by MarketWatch, a department official encouraged staff to “determine what is the bare minimal services … needed” and told them to “let go of the Cadillac service and opt for the Toyota.”

Sattelmeyer at New America worries that bare-bones customer service and fewer staff at an agency that has already been flat-funded by Congress will be disastrous for struggling borrowers.

“A lot of borrowers are going to find themselves in that position where they are trying to get help in an environment where there are cuts and lots of frequent changes,” she said. “That can be really hard to navigate, but it is not too late for the department to act.”

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