On a March day in 2024, people stroll across the University of Southern California campus in Los Angeles, captured in a scene by photographer Mario Tama for Getty Images.
Amidst this scene, a stark financial reality is unfolding. The Federal Reserve Bank of New York has released an estimate revealing that around 9.7 million student loan borrowers have fallen behind on their payments. This surge came after the pandemic-related pause on federal student loan payments ended.
When this payment pause officially wrapped up in September 2023, the Biden administration stepped in with a 12-month “on-ramp” to ease borrowers back into the repayment process. During this period, which ended on September 30, 2024, borrowers were largely shielded from harsh penalties for missed payments.
However, this temporary relief has now passed, and the numbers paint a concerning picture. The New York Fed reports that by the end of this transitional period, the percentage of outstanding federal student loans that were past due hit 15.6%, amounting to over $250 billion in delinquent debt.
The Fed’s report suggests that it’s likely we’ll see student loan delinquencies exceed what we witnessed before the pandemic, especially as these new delinquent statuses begin appearing on credit reports.
The financial consequences for borrowers can be severe. The Fed cautions that a new student loan delinquency could lead to a drop in a borrower’s credit score by more than 150 points, underscoring the critical need for borrowers to stay current on their payments if at all possible.
