80% of 5.8M Delinquent US Student Loan Borrowers Could Reach Default Status in Months
Study forecasts a coming wave of student loan defaults

Around 31% or 5.8 million of US student loan borrowers with outstanding debt are in 'late-stage delinquency,' meaning that they are 90 days past due on payments, as the US Department of Education doubles down on involuntary collections, according to the latest TransUnion report.
Over 80% of the 5.8 million newly delinquent borrowers are expected to reach a default status on their loans by September, with 1.8 million potentially reaching that status as early as July. Once you enter a default status after payments are 270 days past due date, the outstanding amount becomes subject to collection actions by the Education Department.
Initially, borrowers who were past due found relief from the pandemic-era forbearance on federal student loans, which designated all delinquent loans as current. Student loan collection efforts were largely halted since the 2020 pandemic, but the Trump administration stated that taxpayers shouldn't suffer when people don't clear their education debt.
Joshua Trumbull, SVP at TransUnion, said that more borrowers are at risk of becoming delinquent on their loans and eventually default, as many face repayment challenges. 'Defaults will continue to tick higher,' Trumbull added.
A new Pew Research Center study also forecasts a 'coming wave of further student loan defaults — which put borrower financial stability and taxpayer investments at risk.'
Potential Wage Garnishment, Declining Credit Scores
As collection activities are underway, US Secretary of Education Linda McMahon wrote in a Wall Street Journal op-ed that 'borrowers who don't make payments on time will see their credit scores go down, and in some cases their wages automatically garnished.'
It was estimated that wage garnishment could begin for some defaulters in June, and they would receive a 30-day notice before a portion of their salary is withheld.
More worryingly, credit scores dropped by an average of 60 points in recent months for people behind on student loan payments. Furthermore, TransUnion found that super-prime borrowers (credit scores above 780) who were delinquent witnessed a 175-point drop in scores on average.
'Consumers may find themselves shocked by the dramatic and immediate impact that a default can have on their credit scores,' Trumbull noted.
The Federal Reserve Bank of New York also highlighted in March that student loan borrowers who are behind on payments could see their credit scores nosedive by 171 points.
'Although some of these borrowers may be able to cure their delinquencies the damage to their credit standing will have already been done and will remain on their credit reports for seven years,' the Fed researchers wrote in May.
'We expect to see more than nine million student loan borrowers face substantial declines in credit standing over the first quarter of 2025,' the Fed explained in a blog post.
Meanwhile, VantageScore and FICO also reported a decline in average credit scores in February as credit delinquencies jumped upon the resumption of student loan reporting. At that time, VantageScore reported that borrowers behind on payments could see credit scores fall by as much as 129 points.
Lower credit scores may result in reduced credit limits, more difficulty in obtaining loan approval, and higher interest rates on loans or insurance. A poor credit history can also affect job applications or an individual's ability to rent a place.
© Copyright IBTimes 2025. All rights reserved.