Student Debt Time Bomb: 9 Million Americans Could Default as Repayment Safeguards Collapse

A student debt crisis is accelerating across the United States, with warnings that up to nine million borrowers might soon fall into default as pandemic-era protections expire, affordable repayment plans are dismantled and millions struggle to afford basic living costs.

Analysis reported by Forbes shows that defaults are already rising sharply, while a new nationwide survey commissioned by The Institute for College Access and Success (TICAS) exposes the growing human toll behind the numbers.

Millions Already in Default as Pandemic Protections End

When Covid-era forbearance on most federal student loans ended in 2023, more than five million borrowers were already in default, collectively owing nearly $117 billion (£91 billion), according to figures cited by Forbes.

During the pandemic, negative credit reporting and collections were largely paused. That grace period has now ended, and enforcement has resumed.

By October 2025, more than 5.5 million borrowers were already in default, with outstanding balances exceeding $140 billion (£109 billion), Forbes reported, citing new data from the US Department of Education.

Millions more are now on the brink.

The 'Default Cliff' Warning

Borrowers typically enter default once they are more than 270 days behind on payments. Data released in November show that 3.68 million borrowers have already surpassed that threshold, while millions more are seriously delinquent.

TICAS has warned that the total number of defaults could soon exceed nine million, describing the situation as a looming 'default cliff'.

'These findings bring even greater urgency to ongoing concerns about a looming default cliff, where an unprecedented number of borrowers struggle so much to repay their loans that they default on their payments in droves,' the organisation said.

Borrowers Choosing Between Rent, Loans and Food

The new TICAS survey paints a bleak picture of borrower finances.

More than four in ten borrowers (42 per cent) said they are making trade-offs between student loan payments and basic needs such as food, housing and transport. One in five (20 per cent) reported being either delinquent or already in default.

One respondent summed up the desperation facing many households: 'With how the economy is, I can barely afford to live. I have to choose between rent, loans, or putting food on the table. There's no help and it feels like [the] government doesn't care.'

The findings highlighted how student debt is squeezing household budgets, particularly during the holiday season.

Affordable Repayment Plans Scrapped

One of the biggest pressure points is the dismantling of affordable repayment options.

As reported by the Guardian, the Trump administration has moved to shut down the Saving on a Valuable Education (SAVE) plan, a Biden-era income-driven repayment scheme designed to cap payments and offer forgiveness to low-balance borrowers.

New enrolments have been halted, pending applications denied and existing borrowers shifted into alternative plans that often carry far higher monthly costs.

TICAS warned that these changes, combined with the new Repayment Assistance Plan (RAP) introduced under the July 2025 reconciliation law, will disproportionately hurt low- and middle-income borrowers by raising payments, extending repayment terms to 30 years, and eliminating hardship deferments.

Confusion, Mistrust and Servicing Chaos

Beyond affordability, borrowers report widespread confusion and dysfunction.

Nearly 58 per cent of borrowers said they have little trust that the federal government will keep their loans affordable. Many expressed anger that affordable plans were offered and then withdrawn, while others said promised forgiveness never materialised.

More than half (61 per cent) said they had contacted their loan servicer to resolve an issue. While most eventually received help, nearly half (48 per cent) reported long wait times, 24 per cent said they were given inaccurate information, and 11 per cent believe the balance shown on their account is incorrect.

Punitive Consequences as Collections Resume

Default comes with severe consequences. In addition to long-term credit damage, the federal government can garnish wages, seize tax refunds and offset federal benefits, including Social Security and low-income credits such as the Child Tax Credit.

The US Department of Education confirmed earlier this year that collections efforts have resumed. Education Secretary Linda McMahon said taxpayers would 'no longer be forced to serve as collateral for irresponsible student loan policies'.

But TICAS warned that the harsh penalties disproportionately hit the most vulnerable. More than half (51 per cent) of borrowers surveyed had received a Pell Grant, meaning they likely came from households earning under $40,000 (£31,000) a year.

A Crisis Set to Worsen

TICAS warned that borrowers today have fewer resources than ever to navigate repayment, as staffing cuts hollow out the Office of Federal Student Aid and servicers struggle to keep pace with constant policy changes.

'For many borrowers, this is likely to mean default,' the organisation said.

What began as a delayed reckoning during the pandemic is now rapidly turning into a full-blown student debt disaster, threatening the financial stability of millions of American households — and showing little sign of easing.