Student Loan Crisis Deepens as Millions Fall Behind on Payments

A troubling report from TransUnion reveals that nearly 4 million federal student loan borrowers, about one in five with an active payment due, are seriously behind on their payments. This analysis, released on Monday, sheds light on the growing strain among borrowers in the wake of resumed collections.

According to the research, many borrowers are either financially unable to make payments, unaware that payments have resumed, or simply choosing not to pay. The Department of Education’s recent move to restart default loan collections after the pandemic-era freeze adds urgency to the issue.

TransUnion's February data shows a record 20.5% of borrowers with current obligations are 90 days or more overdue—a benchmark used to label borrowers as seriously delinquent. This only accounts for those not in deferment or forbearance.

The numbers mark a sharp rise from pre-pandemic February 2020 levels, when 11.5% of borrowers—roughly 2.6 million—were seriously behind. The previous peak was 15.4% in September 2012, affecting about 3.3 million borrowers.

While the report doesn’t specify the exact reasons for the increased delinquencies, TransUnion noted the real scope may be larger. Some borrowers are already 90 days late but haven’t been officially marked as delinquent due to ongoing payment plan considerations.

After the pandemic pause on student loans ended in September 2023, protections remained in place until October 2024 to prevent negative impacts from missed payments. Still, many borrowers face significant financial stress, especially those with weaker credit backgrounds.

Subprime borrowers are hit hardest, with over 50% of those past due being seriously delinquent. Credit scores have plummeted—by an average of 63 points for federal loan defaulters, and as much as 171 for those with previously excellent credit.

Stories like that of Tyler Wickord, a 29-year-old from Southern California, illustrate the human toll. Facing $12,000 in student debt and high living costs, he’s juggling multiple jobs. “It feels like I’m drowning,” he said, lamenting the burdens that started when he took out loans as a teenager.