A record 7.7 million federal student loan borrowers had defaulted on $181 billion in loans by the end of 2025, and at least 3 million more borrowers are three months behind in payments, according to Education Department data.
It is the highest combined delinquency and default rate since the government began tracking the data nearly 10 years ago.
The crisis reflects broader financial strain on households struggling with rising costs for food, housing and medical care. Delinquencies are also climbing on credit cards, mortgages and auto loans.
Falling credit scores, particularly among younger Americans, also make it harder to rent homes or obtain loans.
Earlier this month, a federal appeals court struck down the Biden-era Saving on a Valuable Education or the SAVE plan that cut many borrowers’ monthly payments in half.
The ruling will force nearly 7 million borrowers to resume payments on their student loans, including accumulated interest, after months of payment relief.
Republican-run states led the legal challenge to the program.
Many borrowers never resumed payments after the pandemic-era freeze ended in 2023, with the number of people in deferment or forbearance growing from 6 million in late 2019 to 12 million today.
The Trump administration paused involuntary collections with the intention of reforming the loan system.
The administration on Thursday announced plans to transfer the $1.7 trillion in student loans to the Treasury Department, a move that is expected to face legal challenges.
Due to massive layoffs by the Trump administration in 2025, staffing at the Federal Student Aid office fell by 45%. Servicer audits halted because of staff shortages, which made it more challenging for the Education Department to oversee the system.
In July 2026, new borrowers will be limited to two repayment options, while millions of borrowers currently on SAVE will need to transition to other plans.
• Juliet La Sala can be reached at jlasala@washingtontimes.com.
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