Lana Oconnell
Student loan debt is a significant burden for Americans, with total debt reaching $1.81 trillion as of the first quarter of 2025. This debt is held by about 42.5 million Americans, with 20% of borrowers falling behind on their loan repayments. The delinquency rate has skyrocketed since pandemic-era relief expired, and the average growth rate of federal student loan debt has slowed to 0.64% per quarter during the pandemic. The high cost of student loans has led to debates about loan forgiveness, with the Biden administration promising to cancel up to $20,000 in student debt per borrower, although these plans were blocked by the Supreme Court. The Trump administration has criticized these actions as unlawful and instead focused on providing support for borrowers to select a legal repayment plan that fits their financial needs.
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What You'll Learn
- Student loan debt is the second-highest consumer debt category
- % of borrowers are behind on loan repayments
- Borrowers are frequently placed in suspended payment options that rack up interest
- The Biden Administration's 'loan forgiveness' promises were ruled unlawful
- Federal student loan debt peaked in Q2 2023 at $1.64 trillion
Student loan debt is the second-highest consumer debt category
The high level of student loan debt has significant implications for individuals' finances, particularly for women and people of color. The delinquency rate has skyrocketed since pandemic-era relief expired, with 20% of borrowers falling behind on their loan repayments. This can negatively impact their credit scores and put them at risk of legal action if the loan remains delinquent for an extended period.
The complex nature of student loan repayment plans contributes to the challenges borrowers face. Many borrowers are placed on suspended payment options that accumulate interest or are enrolled in plans that do not qualify for loan forgiveness. As a result, they may make payments for years, only to be denied forgiveness later. Additionally, loan servicers have been criticized for failing to adequately inform borrowers about the consequences of consolidating their loans.
To address these issues, the U.S. Department of Education has taken steps to improve federal student loan repayment options. The Trump Administration has focused on strengthening the student loan portfolio and simplifying repayment plans. The Biden Administration has also made efforts to improve repayment options, such as processing borrowers' IDR applications faster and providing direct outreach to borrowers enrolled in the SAVE Plan to transition them to legal repayment plans.
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20% of borrowers are behind on loan repayments
Student loan debt is a significant burden for many Americans, and as of 2025, it totals $1.81 trillion, with about 42.5 million Americans carrying this debt. The average student loan debt growth rate outpaces tuition costs, with a 5-year annual average growth rate of 1.66%. This has made student loan debt the second-highest consumer debt category, after mortgages.
A notable concern is that 20% of borrowers are behind on loan repayments, and this delinquency rate has skyrocketed since pandemic-era relief expired. This means that millions of people are at risk of accumulating interest and lowering their credit scores. When a loan remains delinquent for 90 days, credit scores may be negatively impacted as the loan servicer will contact major credit bureaus. Furthermore, if federal loans go unpaid for more than 270 days, the debtor is considered to be in default and may face legal action and lose eligibility for federal aid.
The challenges of repayment are evident, with research indicating that many borrowers would struggle to manage both their monthly bills and loan payments in the event of an emergency expense. A 2017 survey found that 46% of respondents with student loans would make partial loan payments or miss a payment to cover a $400 emergency expense, while only 13% would skip a rent or mortgage payment, and 22% would skip paying a utility bill. This illustrates the difficult choices borrowers face when balancing their financial obligations.
To address these challenges, the Department of Education has taken steps to improve federal student loan repayment options. They have resumed collections on defaulted federal student loans and contacted borrowers to remind them of their legal obligation to repay loans and the benefits of making regular progress. The Trump Administration has also expressed its commitment to supporting borrowers in selecting sustainable repayment plans, while the Biden Administration introduced the SAVE repayment plan, which has since been discontinued due to legal issues.
Moving forward, borrowers will have fewer repayment plan options, with a focus on streamlining the process. The Income-Based Repayment (IBR) plan, for instance, requires borrowers to pay 10% of their discretionary income for 20 years, with any remaining balance forgiven. The Revised Pay as You Earn (REPAYE) plan is another option, offering a guarantee that the loan principal will decrease by $50 each month. However, it is not indexed to inflation, which may lead to higher payment tiers over time.
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Borrowers are frequently placed in suspended payment options that rack up interest
Student loan debt is a significant issue in the United States, with a total debt of $1.81 trillion as of the first quarter of 2025. This debt is held by about 42.5 million Americans, with 20% of borrowers falling behind on their loan repayments. The delinquency rate has skyrocketed since pandemic-era relief expired, and the pause on federal student loan interest, payments, and collections ended 60 days after June 30th, 2022. This means that borrowers are now facing the challenge of resuming payments and managing their debt.
One issue that borrowers frequently face is being placed in suspended payment options that ultimately rack up interest. During the COVID-19 pandemic, the Department of Education eliminated interest and allowed borrowers to pause payments, slowing the average growth rate of federal student loan debt to 0.64% per quarter. However, as of August 1, 2025, interest began accruing again for millions of borrowers, particularly those enrolled in the SAVE Plan. This plan, which was blocked by a federal appeals court, had provided a zero percent interest rate and suspended payments for borrowers. With the resumption of interest, borrowers' balances will increase over time, even as they make their required payments.
The negative impact of suspended payment options that rack up interest is further exacerbated by the challenges borrowers face in transitioning to repayment. After several large servicers terminated their contracts with the Department of Education, over 14 million borrowers had to work with new servicers, requiring them to create new logins, re-enroll in autopay, and update their payment information. Additionally, borrowers often enroll in plans that are ineligible for Public Service Loan Forgiveness, only to be denied after making payments for many years. Service providers also fail to inform borrowers that loan consolidation restarts their progress toward loan forgiveness.
To address these issues, the Department of Education has taken steps to improve federal student loan repayment options. The Trump Administration has committed to supporting borrowers in selecting legal repayment plans that meet their financial needs. They have also resumed collections on defaulted federal student loans, reminding borrowers of their legal obligation to repay their loans. However, critics argue that the Biden Administration's loan forgiveness promises were unlawful and shifted the burden to taxpayers.
As borrowers navigate the complex landscape of student loan repayment, it is crucial to seek reliable financial advice and stay informed about their rights and options. While suspended payment options may provide temporary relief, they often lead to accumulating interest and negatively impact borrowers' financial stability in the long run.
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The Biden Administration's 'loan forgiveness' promises were ruled unlawful
Student loan debt is a significant issue in the United States, with approximately $1.81 trillion in student loan debt held by about 42.5 million Americans. The average growth rate of federal student loan debt was 0.64% per quarter between the second quarter of 2020 and the second quarter of 2023, when the Department of Education eliminated interest and allowed borrowers to pause payments. The high cost of education has led to student loan debt being the second-highest consumer debt category after mortgages. As of 2025, 20% of Americans with undergraduate degrees and 24% of those with postgraduate degrees reported having outstanding student loans. Furthermore, 20% of borrowers are behind on their loan repayments, and delinquency rates have skyrocketed since pandemic-era relief expired.
In August 2022, the Biden administration announced a student loan forgiveness program, stating that as many as 43 million Americans would benefit, with nearly half of those borrowers having all their student loans forgiven. However, this program was met with legal challenges, with several states and individuals arguing that it did not comply with the HEROES Act and other federal laws. The Biden administration defended its actions, claiming that the HEROES Act provided the necessary authority to implement the debt-relief plan.
Despite the Biden administration's assertions, the Supreme Court ruled in Biden v. Nebraska that the administration had overstepped its authority. The court's decision, written by Chief Justice John Roberts, characterized the ruling as a straightforward interpretation of federal law. The vote was 6-3, with Justice Elena Kagan dissenting, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson. Justice Kagan disagreed with the court's ruling, arguing that it overruled Congress's decisions about when and how to delegate power to agencies. She also criticized the court for becoming the "maker of national policy."
Following the Supreme Court's decision, the U.S. Secretary of Education, Linda McMahon, stated that the Biden administration's loan forgiveness promises were unlawful and designed to win votes. She asserted that the administration tried to force taxpayers to foot the bill for loan repayment instead of ensuring that borrowers repaid their loans. The Trump administration pledged to support borrowers in selecting legal repayment plans and protect American taxpayers. The Department of Education began outreach to borrowers enrolled in the SAVE Plan, instructing them to transition to legal repayment options.
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Federal student loan debt peaked in Q2 2023 at $1.64 trillion
Federal student loan debt in the US reached a record high of $1.64 trillion in the second quarter of 2023. This figure represents a significant increase from 2006, when the total federal student loan balance was $480 billion, or 29.3% of the 2023 figure. Between 2006 and 2023, the total federal student loan debt balance increased by 267.1%, with an annual rate of 15.7%. This growth rate outpaced the increase in tuition fees, which rose by 0.72% over the same period.
The high level of federal student loan debt has been attributed to various factors. Firstly, the average student loan debt growth rate has outpaced increases in tuition costs. This suggests that rising tuition fees alone cannot explain the high level of debt. Secondly, the interest rates and fees associated with student loans contribute significantly to the overall debt burden. Thirdly, the pause in interest accrual and payments implemented by the Department of Education from the second quarter of 2020 through to the second quarter of 2023 may have contributed to the peak in debt in Q2 2023. During this period, the average growth rate of federal student loan debt slowed to 0.64% per quarter.
The high level of federal student loan debt has had significant implications for borrowers. Many borrowers struggle to keep up with their loan repayments, with 20-24% of borrowers with payments due falling behind. This delinquency rate has a negative impact on borrowers' credit scores and can lead to legal action if the loan remains unpaid for a prolonged period. The high debt burden also affects borrowers' financial planning, with 57% of Americans stating that they would use savings from loan forgiveness to pay off other debts.
The US government has implemented various measures to address the issue of federal student loan debt. The Trump Administration has focused on strengthening the student loan portfolio and simplifying repayment options. In contrast, the Biden Administration has faced criticism for its handling of student loan forgiveness promises, with federal courts ruling that their actions were unlawful. The Department of Education has also taken steps to improve federal student loan repayment options, such as streamlining the application process for income-driven repayment plans.
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Frequently asked questions
As of May 2025, 16% of Americans with student loans were behind on their payments. This is a combination of those who are delinquent on their payments, in an interest-free forbearance, or in an interest-free deferment.
As of 2025, roughly 42.7 million Americans have outstanding federal student loan debt, totalling $1.77 trillion. This is about 12.5% of the U.S. population.
As of July 2025, 11.2% of adults with student loan debt reported they were unable to make at least one student loan payment that year. Many borrowers have used their would-be federal student loan payments to cover necessities like housing or groceries.
