Federal student loan borrowers are paying down their debt more slowly than before the COVID-19 payment pause, and delinquency rates have climbed back to pre-pandemic levels, signaling potential defaults ahead, according to a new Urban Institute analysis.
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"These findings suggest default rates will spike over the next several months," Cohn wrote in the brief, which offers policy recommendations for protecting vulnerable borrowers and preventing future defaults.
The analysis found that 21 percent of student loan borrowers had at least one delinquency in the 24 months ending in August 2025, matching pre-pandemic levels from 2019. That figure had dropped to just 3 percent during the payment pause, when borrowers were protected from negative credit reporting through administrative forbearance.
Delinquency rates are likely to continue rising, Cohn warned, because the August 2025 measurement captures only 11 months of potential delinquencies for most borrowers since protections ended in October 2024. The "on-ramp" period, which shielded borrowers from most consequences of missed payments including delinquency reporting to credit bureaus and default, lasted one year after payments restarted.
"By August 2026, the share of borrowers with a recent delinquency could be greater than at any point since at least 2015," the report stated.
Student loans have once again become the payment borrowers are most likely to miss, surpassing auto loans, credit cards and mortgages, the data showed. This marks a return to the pattern that existed before the payment pause began, even as credit card delinquencies have increased in the post-pandemic period.
The analysis examined balances for borrowers who were in active repayment in August 2017 and compared them with those who held student debt in active repayment in August 2023, tracking both groups over two years to understand how repayment patterns have shifted.
Borrowers with prime credit scores—above 660—are paying down their balances more slowly than their counterparts before the pandemic. At the median, these borrowers' balances in August 2025 were 86 percent of what they were two years earlier, representing a 14 percent reduction. By comparison, similar borrowers in 2017-2019 reduced their balances by 21 percent over the same timeframe.
For borrowers with subprime credit scores, who may be experiencing financial strain, balances have not substantially changed from pre-pandemic trends. This group's median balance in August 2025 was 2 percent higher than in August 2023, similar to the 3 percent increase seen in the earlier comparison period.
Several factors may be contributing to slower repayment among prime-credit borrowers, the report suggests. Previously defaulted borrowers who enrolled in the Fresh Start program—which moved their loans back into repayment and cleared their credit records of default—may be making smaller payments or missing payments entirely. The program gave defaulted borrowers one year after the payment restart to enroll.
Additionally, borrowers may be less likely to pay more than their required monthly payments after more than three years without making any payments. Increased enrollment in income-driven repayment plans could also be stretching out repayment periods and slowing balance reduction. Confusion created by the creation and subsequent legal blocking of the SAVE income-driven repayment plan added another layer of complexity for borrowers navigating the system.
Another possibility is that some borrowers missed occasional payments during the on-ramp period when they were protected from negative consequences. Past research has found almost 30 percent of borrowers were past due on their payments a few months after the restart, according to the Government Accountability Office.
"Because borrowers were protected from negative credit reporting and delinquency status from missed payments for one year after the pause ended, some borrowers could have been less consistent in making payments during that time, particularly if they had competing bills to prioritize and were not experiencing the negative consequences of missing student loan payments," the report stated.
Monthly payment amounts have remained relatively stable, with median payments at $182 in 2025 compared to $176 in 2019. Required payments at the 25th and 75th percentiles showed similar patterns. However, in real terms adjusted for inflation, required payments have actually decreased from the equivalent of $215 in 2015 to $182 in 2025.
This decrease in real terms could result from increased use of income-driven repayment plans and the fact that undergraduate loan limits have not increased since 2008, keeping undergraduate borrowing down in inflation-adjusted terms, the analysis noted.
The report recommends several policy changes to address the looming default crisis. The U.S. Department of Education could align rehabilitation payments with the amount borrowers will owe after exiting default, avoiding punitive higher payments or sudden increases that put borrowers back at risk. The department could also count rehabilitation payments toward loan forgiveness for borrowers in income-driven repayment plans.
Currently, involuntary collections through wage garnishments or Treasury Department offsets continue for borrowers rehabilitating their loans until they make at least five payments. Stopping these collections during the rehabilitation process could incentivize more borrowers to use this pathway out of default, Cohn suggested.
The department announced in June 2025 that it would pause Social Security offsets for collecting defaulted loans. Cohn recommended making this permanent to protect income for older borrowers who rely on Social Security benefits. The report also suggested capping wage garnishments at the amount borrowers would owe under income-driven repayment plans to protect defaulted borrowers from financial hardship.
The analysis calls for early communication with borrowers about consequences of default, particularly tax refund offsets, which can represent large financial losses that occur all at once. The department should also automatically recertify borrowers in income-driven repayment plans to prevent sudden payment increases that can trigger defaults, though researchers should assess whether this works for the newly created repayment assistance plan, which does not offer zero-dollar payments like previous plans.
More than three years without required payments made re-engaging borrowers particularly challenging. Many newer borrowers had no experience making monthly payments because they took out their first loans during the pause or were still in school when it began in March 2020.
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Dr. Jamal Watson is the author of The Student Debt Crisis: America's Moral Urgency.
