FILE: Student loan defaults have reached record highs in the U.S. (Arnold Gold/Connecticut Post via Getty Images)
Student loan defaults are reaching record highs across the U.S. as borrowers struggle to make ends meet.
According to an Associated Press analysis, 29 states are reporting default rates of at least 20%, and that number could rise as the Trump administration overhauls the federal student loan system. Here’s what to know:
Student loan defaults reach record highs
By the numbers:
According to an Associated Press analysis, roughly 9.5 million people – or 20% of federal student loan borrowers – are more than nine months behind on their payments. Defaults are up by 4.2 million following the end of a COVID-19-era student loan payment pause that kept borrowers from entering default.
Out of $1.7 trillion in federally backed student loans nationwide, $233.3 billion is in default.
What they're saying:
"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," Aissa Canchola Bañez, policy director for the advocacy group Protect Borrowers, told The Associated Press.
Why you should care:
Credit scores can take a hit from just a few months of missed payments, but default is more serious. The government could garnish wages or Social Security payments, though the Trump administration has held off on wage garnishment – for now.
For-profit borrowers struggle more
Dig deeper:
Students who attended for-profit colleges have higher nonpayment rates. Borrowers from for-profit schools fall behind on payments at over twice the rate of public or private nonprofit schools. Thirty-three percent of those borrowers were 90 days or more behind on their student loan payments.
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Out of the schools in the top quarter for nonpayment rates, 76% were for-profit.
Student loan defaults by state
Local perspective:
Mississippi has the nation’s highest default rate at 28.3%, and others near the top include Louisiana, Alabama, West Virginia, Oklahoma, Georgia, South Carolina and Texas. Rounding out the 15 states with the highest default rates are Alaska, Arizona, Ohio, Indiana, Michigan, New Mexico and Nevada.
Of those states, New Mexico was the only one Republican President Donald Trump didn’t win in 2024.
"There’s a lot of misconceptions and tropes about who student loan borrowers are, and who are the ones who are falling behind," Bañez said. "[These are] working-class folks who just cannot keep up with these bills on top of everything else."
Why are so many people defaulting on student loans?
The backstory:
The U.S. Education Department allowed borrowers to suspend federal student loan payments during the economic tumult of the pandemic. Though payments technically started coming due again in 2023, the Biden administration provided a one-year buffer period that ended in the fall of 2024.
Loans couldn’t enter default during this time, and federal programs designed to help delinquent borrowers and debt forgiveness initiatives brought millions out of default.
Starting in June 2025, with the pause having ended nine months prior, borrowers began defaulting again for the first time since the pandemic.
Changes to student loan repayments
What's next:
Advocates warn that more defaults are looming with the Trump administration eliminating the most generous income-driven repayment plan, Saving on a Valuable Education, or SAVE.
Starting this month, new borrowers pick between one standard repayment plan and one income-driven option, as opposed to having several options. Millions of people enrolled in the SAVE plan will have to pay more for student loan payments each month.
What can borrowers do?
What you can do:
If you are in default, you can get your loans back into good standing by either entering a rehabilitation agreement, where you must make nine consecutive payments based on their income, or by consolidating your loans into a new federal Direct Loan.
The Source: This article includes information from The Associated Press and previous FOX Local reporting.