Uh oh!
Two years after the pause on student loan payments expired, millions are once again behind on their school loans.
In a return to pre-pandemic levels, the Urban Institute reports that some six million people are at least 60 days late on their student loans. Delinquency rates are especially high in parts of the South, with more than one in five borrowers in Louisiana, Mississippi, and Georgia past due.
During the more than three-year student loan payment hiatus, the national delinquency rates dropped from 11.6% to 2.3%, allowing many borrowers to take on more debt, including mortgages.
The pause ended in September, when interest began accruing, and payments began the following month.
To soften the transition, the Department of Education (DOE), now nearly shut down by the Trump administration, introduced the Saving on a Valuable Education (SAVE) plan, an income-driven repayment program designed to lower monthly payments for many borrowers, and established a one-year “on-ramp” period during which missed payments would not be reported to credit bureaus or accrue toward default.
But SAVE is currently enjoined by a court order, with the more than seven million borrowers on the plan in general forbearance. Also, the on-ramp protections ended in October 2024, and delinquencies started showing up on credit reports in early 2025.
Falling behind on student loan payments can have long-lasting consequences for borrowers, the Urban Institute warns.
“Delinquency can significantly lower a borrower’s credit score, making it harder to qualify for credit cards, auto loans, or mortgages. And delinquencies longer than 270 days lead to default, which can result in wage garnishment, offset of tax refunds, and loss of eligibility for future federal aid programs.”
To address the situation, the think tank offers several suggestions, including automatically enrolling delinquent borrowers in income-driven repayment plans. The SAVE plan included a mechanism to auto-enroll borrowers who are 75 days delinquent, but the new Repayment Assistance Plan that takes effect on July 1 does not specify auto-enrollment for delinquent borrowers.
Policy-makers also should consider refining federal repayment options, the Institute suggests. Beginning July 1, 2026, the new repayment assistance plan will become the primary income-driven option for federal student loans taken out on or after that date.
Two key adjustments to the plan could help borrowers more effectively, the Institute offers. For one, adjusting payment thresholds for inflation would prevent real debt burdens from rising over time. And secondly, eliminating the marriage penalty built into the repayment formula would prevent borrowers who file their taxes jointly from owing substantially higher payments than if they had filed separately.
Another recommendation is to address broader affordability concerns at the local, state, and national levels.
“The uptick in student loan delinquency does not exist in isolation,” the Institute says. “Delinquency rates on auto loans and credit cards are also on the rise, as are costs across much of daily life, including housing, child care, health care, and food affordability.”
Supporting student loan holders will require more than adjustments to repayment plans, the Institute says, as policymakers at all levels can pursue strategies to reduce the financial pressures households face to help families manage student debt obligations more sustainably.
