The Century Foundation
Nearly one in four student loan borrowers with a payment due is now delinquent — almost triple the pre-pandemic rate — as the Trump administration's rollback of borrower protections has triggered what researchers are calling an unprecedented default crisis, according to a new report released this week.
The analysis, conducted by The Century Foundation and Protect Borrowers, found that roughly 7.9 million borrowers entered delinquency during the first three quarters of 2025, with the overall delinquency rate climbing to 25 percent — up from 9.2 percent before the pandemic payment pause. Nearly 9 million borrowers, or one in five, are now in default, the largest number on record.
The report traces much of the crisis to deliberate policy decisions by the Trump administration that effectively barred millions of struggling borrowers from accessing income-driven repayment (IDR) plans — federal programs designed by Congress to cap monthly payments at affordable levels based on a borrower's income.
In February 2025, the Department of Education halted all processing of IDR applications for three months, the precise window when borrowers were scrambling to avoid delinquency. The department only restored the application portal after being sued by the American Federation of Teachers. Even then, the backlog ballooned to more than 1 million unprocessed applications at one point. In August, the department mass-rejected 328,000 applications; as of Dec. 31, 734,000 applications remained unprocessed.
"While Americans across the country increasingly struggle to pay their bills, the Trump administration is making things worse by actively pushing student loan borrowers over the edge and into default," said Peter Granville, a Century Foundation fellow and lead author of the study.
The financial damage extends well beyond missed payments. Borrowers with delinquent loans saw their credit scores drop by an average of 57 points over the first three quarters of 2025, plunging three-quarters of them into "deep subprime" territory. For approximately 2 million borrowers who held near-prime or better credit scores in 2024, the drop averaged 100 points — from 680 to 580.
That credit score collapse carries cascading consequences. Borrowers who fall from a 680 to a 580 score are projected to pay an average of roughly $64,000 more over the life of a mortgage and nearly $8,800 more on auto loans. Many will struggle to rent apartments, as landlords frequently require a minimum score of 650 just to apply. Employers in some states check credit as part of the hiring process, and one study found that one in seven people with poor credit histories was denied a job as a result.
The crisis is falling hardest on communities of color. Delinquency rates for Black and Native American borrowers have reached nearly 50 percent. Borrowers who received Pell Grants — a proxy for lower-income backgrounds — are delinquent at a rate of 27 percent, compared to 15 percent for non-Pell recipients. States in the Southeast, including Louisiana at 40 percent and Mississippi at 39 percent, posted some of the nation's highest delinquency rates.
Researchers warn a second wave may be coming. The Republican budget reconciliation law signed by President Trump in July repealed the Biden administration's Saving on a Valuable Education (SAVE) plan, the most affordable IDR option in history, to help offset the cost of tax cuts. Approximately 8 million borrowers who had been shielded in a legal forbearance while the plan was litigated will now face higher monthly payments. If they default at the same rate as the broader borrower population, the total number of Americans in student loan distress could reach 17 million or more.
"This is code red for working families, the affordability crisis, and the broader economy," said Jennifer Zhang, a policy analyst at Protect Borrowers and co-author of the study.
The Office of Federal Student Aid lost 653 employees in 2025, a 42 percent reduction, while the Consumer Financial Protection Bureau's student loan oversight function was gutted. Student loan complaints surged 36 percent over the year, with more than nine in ten borrowers reporting their concerns were not fully addressed.
