Key facts
- Millions of student loan borrowers are defaulting on their loans.
- The number of defaulted student loans increased by over 4.2 million between April 2025 and March 2026.
- Borrowers can enter default after nine months of missed payments.
- Consequences of default include damage to credit ratings and wage garnishment.
- Changes to income-driven repayment plans may lead to higher monthly payments for some borrowers.
Millions of Americans are struggling with surging student loan defaults as payments resumed after a pandemic-era freeze. Ashley Dreahn, a borrower from Texas, found her student loans had ballooned to nearly $95,000 and she was in default, despite believing they were discharged in bankruptcy. This situation is not isolated; an Associated Press analysis revealed a jump of over 4.2 million borrowers into default between April 2025 and March 2026. Hundreds of thousands more are on the verge of default.
The consequences of default can be severe, including damage to credit ratings and potential wage garnishment. The federal government has the ability to garnish wages and Social Security payments from borrowers in default. A Moody's Analytics report warned that widespread garnishments could create an additional headwind for an already fragile economy.
Many borrowers, like Dreahn, found it easy to take out loans without fully understanding the implications. She borrowed heavily to attend university and later for additional degrees, feeling pressured to sign loan documents without clear explanations. The process of discharging student loans in bankruptcy is notoriously difficult, requiring borrowers to prove "undue hardship," a standard few meet.
The wave of defaults accelerated after the pandemic relief measures, which allowed borrowers to suspend payments until 2023, were lifted. The Biden administration's subsequent grace period ended in fall 2024, leading to the current surge. Approximately 9.5 million borrowers, more than one in five, are now in default, surpassing the previous record of 8 million in December 2019. Additionally, 870,000 borrowers are between 181 and 270 days late on payments. Borrowers at for-profit schools are disproportionately affected, with 33% at least 90 days late on payments.
Some borrowers are overwhelmed by the complexity of the federal student loan system and changes to repayment options. Organizations like Career Education Colleges and Universities are forming task forces to guide students on loan repayment.