Student Loan Defaults Reach Record High
A recent report indicates that Generation Z is facing serious challenges with low credit scores and growing worries about job opportunities. The situation with student loans is particularly alarming, with defaults hitting unprecedented levels.
Currently, there are 9.5 million borrowers in default, categorized as being over 270 days late on their payments, as per the Office of Federal Student Aid. This figure marks a record and is nearly double what it was when former President Biden’s pandemic-related pause on payments was in effect.
In March 2025, around 5.3 million borrowers had defaulted soon after the end of the payment moratorium established during the COVID-19 pandemic. Although the formal pause ended in January 2024, it was extended for an additional nine months, leading to a noticeable uptick in defaults by June 2025, with over 4 million defaults reported.
As of now, these 9.5 million defaulters account for more than 20% of all federal student loan borrowers. Out of the staggering $1.7 trillion in federally backed student loans, about $233.3 billion is currently in default.
Those who default on their loans face various consequences, including having their loans transferred to collection agencies or their wages garnished. The Trump administration has been slow to implement aggressive measures, deferring plans to resume foreclosures earlier this year.
Amid these developments, a federal appeals court recently put an end to the SAVE Plan, an effort initiated by the Biden administration aimed at reducing repayment amounts for many borrowers, impacting approximately 7.5 million individuals. This challenge, spearheaded by Republican attorneys general, garnered support from the Trump Department of Justice.
The South has the highest percentage of borrowers in default, with Mississippi at the forefront, showing over 28% of borrowers in this situation. Interestingly, Puerto Rico surpasses Mississippi with more than 30% of borrowers defaulting.
FOX Business has reached out for further insights from the White House and the Department of Education about how they’re addressing this pressing issue.
