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For the first time in nearly four years, millions of Americans are facing the harsh financial reality of student loan delinquencies appearing on their credit reports. According to a recent analysis by the Federal Reserve Bank of New York, the end of the federal student loan payment pause has triggered a significant spike in delinquencies, leading to dramatic drops in credit scores and raising broader concerns about ripple effects across the credit economy.
The student loan payment freeze, which began at the onset of the COVID-19 pandemic in March 2020, lasted for an unprecedented 43 months.
When payments resumed in October 2023, the U.S. Department of Education granted borrowers a 12-month "on-ramp" period during which missed payments wouldn't be reported to credit bureaus. That grace period expired in October 2024-and the first quarter of 2025 has revealed the financial fallout.
According to the Fed, nearly 6 million student loan borrowers-13.7 percent of those required to repay-were 90 or more days delinquent or in default in the first quarter of 2025. That figure, while slightly lower than the 14.4 percent seen before the pandemic, marks a disturbing return to pre-COVID patterns.
Another 23.7 percent of borrowers were behind on payments but less than 90 days delinquent, a number that could climb as economic pressures mount.
The financial consequences are already unfolding in devastating ways. The Department of Education and the Treasury have begun collections on defaulted loans, including garnishing wages, tax refunds, and even Social Security benefits. According to the Fed, the impact on borrowers' credit is already significant and could worsen.
More than 2.2 million newly delinquent borrowers have seen their credit scores drop by over 100 points, with more than 1 million experiencing drops of at least 150 points.
While some of these borrowers already had subprime credit, an estimated 2.4 million had scores above 620, making them previously eligible for credit cards, auto loans, or mortgages. Many now find themselves suddenly locked out of traditional lending.
Who is most affected?
Not all borrowers are in repayment. Over 20 million Americans remain in deferment, forbearance, or other non-repayment statuses, while another 5 million are enrolled in income-driven repayment plans with $0 monthly payments.
But among those required to pay, borrowers over age 40 are disproportionately affected. At least 1 in 4 in that age group are 90+ days behind on their student loans, suggesting long-term financial strain for those nearing retirement.