The United States is facing a record student loan debt crisis. About 9.5 million people are currently in default, meaning they have not made required student loan payments for more than nine months. Currently, about one in five federal student loan borrowers is in default.
The number of defaulting borrowers has increased dramatically. That number jumped from 5.3 million last June to about 9.5 million currently, according to the U.S. Department of Labor. federal student aid. The amount of student loan arrears has also increased. According to CBS News, the Office of Federal Student Aid said that approximately $233 billion in federal student loans out of the government’s $1.7 trillion student loan portfolio are currently in default.
Student loan payments restart
The problem worsened after pandemic protection measures ended. The U.S. government is allowing borrowers to pause their student loan payments during the COVID-19 pandemic. Student loan payments officially restart in 2023, but borrowers have a one-year grace period so missing payments won’t immediately cause them to default.
That safety period ends in the fall of 2024, and borrowers could start defaulting again after nine months of delinquency. The federal student aid office said borrowers began falling into default again starting in June 2025 for the first time since the pandemic, CBS News reported. Once the payment clock restarts, many borrowers will be out of time. Defaulting can severely damage a borrower’s credit score, making it more difficult to borrow money in the future.
Student loan default risk
Borrowers who default may also lose the opportunity to receive new federal student financial aid. The government can also take money directly from wages or Social Security payments to collect on unpaid student loans. The Trump administration has temporarily halted these mandatory collections. However, borrowers could still face another wave of defaults in the coming months. According to NewsNation, nearly 1 million borrowers have been six to nine months behind on payments, putting them very close to default. Student loans are difficult to eliminate through bankruptcy.
Borrower advocates say many Americans can’t keep up with rising costs. “People are struggling to make ends meet, and student loan bills are making it worse,” said Aissa Canchola Bañez, director of policy for Protect Borrowers, according to CBS News. She said many of those left behind are working-class people. American They are unable to pay their student loans and other daily expenses, CBS News reported.
SAVE repayment plan ends
As part of reforms to the federal student loan system, the Trump administration ended the SAVE repayment program, one of the most generous income-driven repayment plans. Millions of borrowers who joined SAVE may now have to pay higher monthly loan bills. New borrowers now have fewer repayment options. They can choose between a standard repayment plan and an income-driven repayment plan.
The Department for Education said the new system was designed to simplify the repayment process, which has become confusing. An AP analysis found that many of the states with the highest default rates are in the southern United States. Mississippi’s student loan default rate is 28.3%, the highest in the nation. Other states with higher default rates include Louisiana, Alabama, West Virginia, Oklahoma, Georgia, South Carolina and Texas.
The list also includes Alaska, Arizona, Ohio, Indiana, Michigan, New Mexico and Nevada, according to an AP analysis. Of these states, New Mexico is the only one with a presidential appointee. Donald Trump Did not win the 2024 election. Puerto Rico’s default rate is 30.9%, higher than any other state in the United States. Borrowers who attend for-profit colleges have a harder time repaying their loans than others, according to the federal student aid office.
For-profit college loan troubles
About 33% of for-profit college borrowers are at least 90 days behind on their student loans, according to the Office of Federal Student Aid. According to the Office of Federal Student Aid, late payment rates are more than twice the rate for borrowers attending public universities. Of the schools with the highest delinquency rates, 76 percent are for-profit colleges, according to the Office of Federal Student Aid.
The federal student aid office says schools with higher delinquency rates face a serious risk of more borrowers defaulting. The Vocational Education College and University Organization, which represents private vocational schools, has formed a working group to encourage students to repay their loans.
Jason Altmaier, president of Career Colleges and Universities, said the organization is taking the issue seriously, CBS News reported. Altmaier said the rise in defaults is related to the coronavirus pandemic and confusion over the Biden administration’s unsuccessful student loan relief efforts. He said student loan defaults are “a real problem” and the issue will be discussed at the association’s summer meeting. Additionally, many Americans are struggling to pay for daily needs like groceries.
Grocery chain Giant Eagle is temporarily lowering prices on more than 300 food items during Labor Day, NewsNation reports. The company said it was its own summer promotion, although President Donald Trump praised the move on social media and said it supported his efforts to lower household costs.
