Surge in Delinquencies Among Reliable Borrowers
Recent data indicates a significant rise in student loan delinquencies. According to credit bureau TransUnion, as of February 2025, 20.5% of the 19.6 million federal student loans are over 90 days delinquent—surpassing the previous record set in 2012. Alarmingly, nearly 25% of these delinquencies are among borrowers with prime or better credit scores, suggesting that even financially responsible individuals are now struggling to repay.
Source: MarketWatch
Credit Scores Are Plummeting
Up to 200-Point Drops Reported
Borrowers with high credit scores are seeing dramatic decreases. Reports show that missing a student loan payment can slash a credit score by 99 to 175 points on average. In extreme cases, the drop has been as much as 200 points. These declines can significantly reduce access to housing, auto loans, and employment opportunities that depend on creditworthiness.
Why Is This Happening?
1. Collections Resume After a Long Pause
Following a five-year pause due to the COVID-19 pandemic, the U.S. Department of Education officially resumed collections on defaulted student loans on May 5, 2025. Borrowers now face the risk of wage garnishments, tax refund seizures, and Social Security offsets for unpaid debt.
2. Systemic Servicing Failures
Many borrowers report being hamstrung by technical problems, including:
- Lost or misapplied payments
- Inaccurate billing statements
- Poor customer service and unreachable loan servicers
The Consumer Financial Protection Bureau (CFPB) has flagged these issues as harmful, especially when they prevent borrowers from enrolling in more affordable repayment plans or claiming forgiveness options.
Source: Business Insider
3. Legal Blocks to Relief Plans
The Biden administration’s SAVE (Saving on a Valuable Education) plan an income-driven repayment program designed to lower monthly costs—has been temporarily blocked in court. Around 8 million borrowers who signed up for SAVE now face uncertainty, with no clear timeline for resolution.
Source: VantageScore
Wider Economic Stress
These trends reflect a broader financial strain. Inflation, higher cost of living, and the end of pandemic-era aid have hit households hard. The Federal Reserve Bank of New York has also reported a parallel rise in credit card delinquencies, especially among younger adults who are now also responsible for resuming student loan payments.
Source: Forbes
What Borrowers Can Do
Explore Federal Assistance Options
The U.S. Department of Education encourages borrowers to take advantage of available programs:
- Income-Driven Repayment Plans: These reduce monthly payments based on income and family size. Plans like IBR (Income-Based Repayment), PAYE (Pay As You Earn), and REPAYE are still active even if SAVE is paused.
Learn more at Federal Student Aid - Loan Rehabilitation or Consolidation: Those in default may remove the default status through rehabilitation or consolidate loans for easier management.
Explore Default Resolution options - Forbearance or Deferment: Temporary relief options may apply in cases of unemployment or hardship.
What’s Next?
With student loan delinquencies now affecting even those with high credit scores, it’s clear the U.S. is facing a deeper systemic problem—not just one of missed payments. As legal battles over relief continue and financial pressures mount, millions of borrowers remain in a precarious position.
Borrowers are encouraged to stay proactive, review their repayment options, and seek assistance when needed.
For more information, visit the official Federal Student Aid website.