A new report from the Federal Reserve Bank of New York’s Center for Microeconomic Data reveals a sharp increase in student loan delinquencies, raising concerns about the financial health of millions of borrowers.
The report, which includes data updated through the first quarter of 2025, shows that after a five-year pause, student loan delinquency rates have returned to pre-pandemic levels. Nearly one in four borrowers (23.7%) with a payment due are now behind on their student loans. This surge is attributed to the expiration of pandemic-era protections that temporarily halted loan payments and reporting of delinquencies to credit bureaus.
The consequences of this rise in delinquencies are significant. The report highlights that borrowers who have become newly delinquent are experiencing substantial declines in their credit standing. Over 2.2 million borrowers saw their credit scores drop by more than 100 points, and over one million saw decreases of at least 150 points. This credit score damage will lead to:
- Higher borrowing costs for future loans (auto, mortgage, etc.)
- Difficulty obtaining new credit cards
- Challenges securing housing and employment
The findings underscore the vulnerability of borrowers, particularly those over 40 and those with already subprime credit scores, who now face increased financial hardship due to these delinquencies.
“The resumption of federal student loan collections marks a significant and potentially destabilizing event for millions of borrowers who have already faced economic hardship. The end of this long-standing pause demands immediate attention and action from borrowers to understand their repayment options and avoid the severe consequences of default, including wage garnishment and the withholding of essential federal benefits,” says Noelle Carter, President & CEO of Parachute Credit Counseling.
For those facing student loan challenges, Parachute Credit Counseling offers free, confidential support. Our experienced counselors advocate for borrowers, helping them understand their options with the Default Resolution Group and assisting them in choosing the path that aligns with their best interests. For more information, borrowers can call 716-712-2060 or visit https://parachutecreditcounseling.org/.