- The New York Federal Reserve found that the share of delinquent student-loan borrowers surged.
- In the first quarter of 2025, 8.04% of borrowers transitioned to serious delinquency, up from 0.8% a year prior.
- It's largely a result of the end of the five-year pause on credit reporting for borrowers behind on payments.
Millions of student-loan borrowers are behind on payments, and it's putting them at greater risk of wage garnishment and seizure of federal benefits.
On Tuesday, the New York Federal Reserve released its quarterly household debt and credit report — and student-loan borrowers were a red flag in the new data.
In the first quarter of 2024, 0.8% of student-loan borrowers moved into serious delinquency, or being at least 90 days behind on payments. The New York Fed's Monday report found that in the first quarter of 2025, that number surged to 8.04%.
New York Fed researchers told reporters on a Tuesday press call that an increase in delinquencies was expected. For the past five years, student-loan borrowers behind on payments have not faced collections or consequences for defaulting or delinquency, including having those lapses affect their credit scores. The moratorium on credit reporting ended in October 2024, so the researchers said it made sense that reported delinquencies would rise — it was the extent of the surge that was unexpected.
The New York Fed also found that many newly delinquent borrowers — those who were current on their loans in the fourth quarter of 2025 but have at least one loan 90 or more days past due in the first quarter of 2025 — have seen drops in their credit scores. The data showed that 2.2 million of those borrowers saw their credit scores drop more than 100 points, and 1 million of those borrowers saw at least a 150-point drop.
The New York Fed's blog post on student-loan delinquencies said that those credit score drops "will increase borrowing costs or seriously limit their access to credit like mortgages and auto loans."
The New York Fed also said that while the surge in delinquencies was drastic following the five-year pause on payments, the rates are now at the "pre-pandemic 'normal,' with more than 10 percent of balances and roughly six million borrowers either past due or in default."
"The ramifications of student loan delinquency are severe," the blog post said. President Donald Trump restarted collections on defaulted student loans on May 5 and sent notices to nearly 200,000 borrowers in default that they will begin to face garnishment of federal benefits in 30 days if they don't begin making payments.
New York Fed researchers said that there is still time for borrowers who contributed to the surge in delinquencies to bring themselves back to good standing. For example, the researchers said, many of them might not have been aware that payments and credit reporting were resuming, and they might have had the capabilities to make payments had they known.
Still, some borrowers in default previously told Business Insider that they're aware that credit reporting restarted, and they cannot afford to make payments, so they're expecting to face garnishment of federal benefits, and eventually, wages.
"They're going to have to come and take it from me, and then I've got to figure out somehow how to live past that point," a defaulted student-loan borrower said.
Do you have a story to share about your student loans? Are you in default, or concerned about defaulting? Reach out to this reporter at [email protected].
