End to Student Loan Payment Pause Yields Sharp Rise in Defaults

Student loan defaults reached a record high, with 9.52 million borrowers in default, as of March, according to new data from the Office of Federal Student Aid.

The numbers have surged since loan payments came due following a more than 3.5-year-long COVID-19-era moratorium. While payments technically resumed in October 2023, the Department of Education provided a one-year buffer period that ended in September 2024. The DOE resumed collections on its defaulted federal student loan portfolio in May 2025—a role that is now the responsibility of the U.S. Department of the Treasury.

Student loan defaults are often considered a sign of declining financial wellness. Fidelity Workplace found it important for plan sponsors to be aware of how severe debt and student loan defaults hinder employees’ financial wellness and retirement readiness.

Research in 2025 by the TIAA Institute found “concerning impacts of student loan debt on financial security, including limiting housing options, delaying homeownership, and creating barriers to long-term financial planning—particularly for historically marginalized populations.”

June 2025, the deadline for student loan borrowers to resume payments and avoid defaulting, marked the start of the steep rise in the default rate. Nine months later, the number of borrowers in default has increased by about 4.2 million.

The nearly 10 million borrowers in default are nearly double the 5.3 million figure from March 2025, the lowest number recorded during the payment pause. Of the $1.7 trillion in federally backed student loans in the U.S., $233.3 billion is in default, according to data from the Office of Federal Student Aid.

Looking ahead, a new wave of defaults could stem from the July 1 elimination of the Saving on a Valuable Education plan—an income-driven debt relief program created in 2023, which served more than 7 million borrowers. Borrowers previously enrolled in the now-defunct repayment program have 90 days from July 1 to choose a new repayment plan. Borrowers who do not transition to a new plan within the 90-day period will be automatically enrolled into either the Standard Repayment Plan or the Tiered Standard Plan, which debuted July 1, according to March 27 guidance from the Department of Education.

Under the standard plan, fixed payments are made for up to 10 years. Only loans disbursed before July 1 are eligible for the plan.

The tiered plan, enacted under the One Big Beautiful Bill Act, determines the borrower’s monthly payment based on the amount of the principal balance that is owed when the borrower begins the plan, the interest rates of the loans and the length of the repayment period.

In a response to emailed questions, the DOE cited the following support provided by President Donald Trump’s administration to borrowers:

• a “defaulted loan support center,” through which borrowers can learn about tools available to help them get out of default;
• an improved loan consolidation process for defaulted borrowers, leveraging the Treasury’s “expertise” in collecting delinquent and defaulted debts;
• “simplified” repayment through the Working Families Tax Cuts Act;
• caps on graduate loans through the act, “preventing students and parents from taking on debt they may never be able to repay and forcing institutions to lower the cost of college tuition”; and
• conversations between government officials and institutions of higher education, to communicate about their shared responsibility to support borrowers throughout repayment.

 “We will continue to increase our support to borrowers who want to get back into regular, on-time repayment and ensure that American taxpayers are not left footing the bill,” DOE spokesperson Ellen Keast wrote in her response to questions.