Student loan delinquencies skyrocketed in the first quarter of 2025, posing a potential threat to consumers’ ability to make timely payments on their other debts.
Since the same period last year, educational loans that were 90 or more days past due increased tenfold — from 0.8% in the first quarter of 2024 to 8.04% a year later, according to a
“To address the elephant in the room, the student loan delinquency rate spiked up back to where it was before the pandemic,” a researcher at the New York Fed said during a call with journalists on Tuesday.
To some extent, the New York Fed said, the rise in delinquencies was expected as federal policies that began during the early days of the COVID-19 pandemic expired. In March 2020, Congress paused payments on federal student loans — a moratorium that, thanks to several extensions, lasted until October 2023.
At that point, the Biden administration enacted a one-year “on-ramp” period, during which missed payments were not reported to credit agencies. In October 2024, the on-ramp ended. Ninety days later, loan servicers started reporting serious delinquencies again.
“This has been sort of a car crash unfolding in slow motion, because we’ve had this multiyear run-up,” said Ted Rossman, a senior analyst at the consumer finance company Bankrate. “We’re really just starting to see the impact of this.”
In and of itself, the jump in student loan delinquencies may not set off alarm bells for banks.
“There’s definitely a spillover with other debts,” Rossman said. “Some of why people are carrying credit card debt is because they don’t have the money, because maybe they are repaying their student loans. … That’s a big trend we’ve seen in recent years.”
The missed payments can also have other consequences. As student borrowers fall into delinquency or even default, their credit scores could deteriorate, making it harder to obtain a credit card, take out an auto loan or get approved for a mortgage. All of that can make a dent in banks’ consumer lending business.
By one measure, student loan delinquencies still fell short of their pre-pandemic levels during the first quarter. In the last three months of 2019, just before COVID-19 arrived in the U.S., the portion of student loans that were 90 or more days past due was 9.21% — more than one percentage point above the rate last quarter.
Others believe there’s more trouble beneath the surface.
Economists at Morgan Stanley, using data from the Department of Education and Federal Student Aid, recently calculated that in the fourth quarter of 2019, 22% of all federal student loans were either in default or deferment, while 10% of them were in forbearance. In the first quarter of this year, the percentage of those loans that were in default or deferment had fallen to 16%, but the share that were in forbearance had soared to 36%.
“We estimate the delinquency rate is still well above pre-Covid levels,” the Morgan Stanley economists wrote in a May 5 report.
Furthermore, some experts don’t think the delinquency rates are finished rising. Rossman, for one, believes the full impact of the on-ramp won’t be felt until July, when some of the delinquent loans will cross the border into default.
“Even though I believe the current figures are lower [than in 2019], the trajectory upward has been rapid,” Rossman said. “I do think that these numbers are going to go higher.”
Another challenge is that, since the end of the pandemic, inflation has remained stubbornly elevated. As student borrowers got a reprieve during the repayment pause, rising prices often filled in the gap.
“A lot of people got used to not paying these student loans for a while, and then at the same time their housing bills and insurance and groceries and everything else went up,” Rossman said. “It just became harder to fit that into the budget.”
In the first quarter of 2025, total U.S. household debt reached $18.2 trillion, up $516 billion from the same period last year, according to the New York Fed’s report. The overall rate of serious delinquency, defined as 90 days or more past due, was 2.45% — up from 1.54% a year earlier.
For lenders, it all adds up to a more stretched consumer, struggling to balance education debts with today’s bills.
“It’s relevant from a spending and debt standpoint, but also from a delinquency standpoint,” Rossman said. “If there’s not enough money for one thing, there may not be enough money for another.”
