Savanna Hoffman
Student loan debt is a significant issue in the United States, with 42.5 million Americans holding a collective student loan debt of $1.81 trillion. As of May 2025, 16% of Americans with student loans are behind on their payments, and this figure rises to 24% for those with payments due. This delinquency rate has skyrocketed since pandemic-era relief expired. An August 2025 survey by the AICPA found that 74% of Americans with personal student loans are worried about their ability to repay them, with over half stating that these loans affect their ability to save for other financial goals. The high cost of education and the subsequent debt incurred can cause stress and negatively impact financial stability, especially for those with lower incomes and less education.
| Characteristics | Values |
|---|---|
| Percentage of Americans with student loans behind on their payments | 20% |
| Percentage of borrowers who attended public institutions behind on their student loan payments | 9% |
| Percentage of borrowers who attended private, nonprofit institutions behind on their student loan payments | 7% |
| Percentage of borrowers who attended private, for-profit schools behind on their student loan payments | 24% |
| Percentage of Americans with personal student loans worried about their ability to pay those loans | 74% |
| Percentage of Americans with personal/parent loans who say those loans affect their ability to save | 53% |
| Percentage of Americans with children with student loans who are worried about their child(ren)'s ability to pay for their student loans | 70% |
| Percentage of Americans with personal/parent student loans who say their loans were previously deferred and are now expected to be paid back | 55% |
| Percentage of Americans with children with student loans who say those loans were previously deferred and are now expected to be paid back | 49% |
| Percentage of borrowers in repayment and current on their student loans | 38% |
| Number of borrowers who have been unable to begin repayment due to a processing pause | 1.9 million |
| Number of borrowers owing student debt | 42.5 million |
| Number of borrowers who have not made a monthly payment in over 360 days | 5 million |
| Percentage of student loan debt that is seriously delinquent | 10.16% |
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What You'll Learn
Student loan debt statistics
Student loan debt is a significant issue in the United States, with millions of borrowers struggling to keep up with their repayments. As of 2025, 42.5 million Americans hold a total student loan debt of $1.81 trillion. This makes student loan debt the second-largest type of debt after mortgages.
Impact of the Pandemic
The pandemic exacerbated the issue of student loan debt, with many borrowers falling behind on their repayments. By July 2020, 11.2% of adults with student loan debt reported being unable to make at least one payment that year. The delinquency rate further increased after the expiration of pandemic-era relief measures.
Default and Delinquency
As of May 2025, the Trump administration resumed collections on defaulted student loans, including through wage garnishment. Default occurs when federal loans go without payment for more than 270 days, and the debtor becomes subject to legal action and loss of federal aid eligibility. Delinquency, on the other hand, occurs when a loan payment is missed, and the loan becomes delinquent after 90 days of non-payment. The delinquency rate for student loans is roughly double that of credit card debt. As of the second quarter of 2025, 10.16% of student loan debt was already 90 days or more past due.
Concerns and Challenges
An August 2025 survey by the American Institute of CPAs (AICPA) found that 74% of Americans with personal student loans are concerned about their ability to repay them. The survey also revealed that 53% of respondents with personal or parent loans stated that these loans affected their ability to save for other financial goals. Additionally, 70% of respondents with children holding student loans were worried about their children's ability to repay their loans.
Mismanagement and Deceptive Practices
There have been issues with the management of student loans, with 70% of complaints related to mismanagement and deliberate deception by servicing companies. Borrowers are often placed on suspended payment options that accumulate interest instead of being informed about income-driven repayment plans. Servicers also provide misleading information about loan forgiveness and consolidation, negatively impacting borrowers' progress toward loan repayment and forgiveness.
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Mismanagement and deception
Student loan debt is a significant issue in the US, with around 42-43 million Americans owing a combined total of over $1.6 trillion in student debt. In May 2025, the Trump administration resumed collections on defaulted student loans, including wage garnishment. This has put millions of people at risk of credit score downgrades.
Additionally, many students are unaware that they are eligible for income-driven repayment plans on federal loans, as required by law. Servicers frequently fail to assist them in enrolling in these plans and instead place borrowers in suspended payment options that rack up interest. Borrowers are also misled about their eligibility for Public Service Loan Forgiveness, only to be denied after making payments for many years. Loan consolidation can also restart the progress a borrower has made toward loan forgiveness, but this is often not explained by service providers.
In 2024, MOHELA, a student loan servicer, was sued for mismanagement of student loans. The company was accused of illegally overcharging borrowers, failing to process paperwork, and actively misleading borrowers about their loan accounts. These practices may have violated federal and state laws, exposing the company to significant liability.
The CFPB has also sued Navient (formerly Sallie Mae), the largest student loan servicing company in the US, alleging gross mismanagement, deceiving students, and depriving them of their rights.
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Delinquency and default
The consequences of delinquency and default can be severe. Those who become delinquent are seeing significant declines in their credit scores by an average of 60 points. If federal loans go without payment for more than 270 days, the debtor is considered to be in default and can lose eligibility for federal aid and be open to legal action. Wage garnishing and withholding tax refunds are other ways the government and private lenders may collect on defaulted loan payments. A lender can arrange to have an employer withhold a portion of each paycheck to be paid directly to the lender.
There are, however, options for borrowers who are struggling to make their payments. Income-driven repayment plans are available, as are deferment or forbearance options, which can help borrowers avoid default while pausing payments. Additionally, the Biden-Harris Administration had pursued targeted debt relief and the previous administration had offered suspension in payments of up to three months.
Defaulting on student loans can have long-term or even irreparable consequences. The loan is immediately due in its entirety, along with any interest. A borrower who has defaulted on a federal student loan loses eligibility for future benefits. Defaulted student loans are reported to credit bureaus, and as a result, borrowers may not be eligible to receive other types of loans, such as home and auto loans. It can take years to undo the damage.
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Income-driven repayment plans
Income-driven repayment (IDR) plans are a type of federal student loan repayment program in the United States that sets payments based on a borrower's income and family size. These plans are designed to make repayment more manageable for borrowers who are struggling to keep up with their loan payments. Under IDR plans, borrowers typically pay a percentage of their discretionary income (usually 10% to 20%) for 20 or 25 years, after which any remaining balance is forgiven.
There are several types of IDR plans available, including:
- Income-Based Repayment Plan (IBR Plan): This plan sets the monthly payment at 10% or 15% of the borrower's discretionary income, depending on when they took out their loans.
- Pay As You Earn (PAYE) Plan: The PAYE plan caps monthly payments at 10% of the borrower's discretionary income.
- Revised Pay As You Earn (REPAYE) Plan: Similar to PAYE, but there is no cap on monthly payments, and married borrowers can file taxes separately to exclude their spouse's income from the calculation.
- Income-Contingent Repayment (ICR) Plan: The ICR plan calculates monthly payments based on either 20% of the borrower's discretionary income or the amount they would pay on a fixed 12-year repayment plan, whichever is lower.
One key feature of IDR plans is that they offer loan forgiveness after a certain period. If borrowers consistently make payments under an IDR plan for 20 or 25 years, any remaining balance on their loans will be forgiven. However, the forgiven amount may be treated as taxable income, resulting in a potentially significant tax bill.
While IDR plans can provide much-needed relief for borrowers struggling with student loan debt, there are some considerations to keep in mind. Firstly, IDR plans often result in longer repayment terms, which means borrowers may end up paying more in interest over time. Additionally, there have been challenges and criticisms surrounding the implementation and management of IDR plans, with reports of mismanagement and deliberate deception by loan servicing companies.
In recent years, there have been efforts to reform IDR plans and address some of these issues. For example, the House-passed Repayment Assistance Plan (RAP) proposes a minimum monthly payment of $10, regardless of income, to encourage timely repayment and accountability. However, as of July 2025, many IDR plans are in legal limbo due to litigation against the newest plan developed by the Biden administration.
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Concerns about financial stability
The financial burden of student loan debt is a significant concern for many individuals, impacting their financial stability and long-term planning. An alarming number of borrowers struggle to repay their student loans, and this issue has only been exacerbated by the recent economic climate.
Impact on Financial Stability
Student loan debt is a substantial burden for many Americans, with a total debt of $1.6 trillion to $1.81 trillion held by about 42.5 million to 42.7 million Americans. It is the second-largest type of debt after mortgages, and the delinquency rate has skyrocketed since pandemic-era relief expired. In May 2025, the Trump administration resumed collections on defaulted student loans, including wage garnishment. This has put millions of individuals at risk of damaged credit scores and further financial instability.
Challenges in Repayment
A significant number of borrowers face challenges in repaying their student loans. As of May 2020, 9% of borrowers from public institutions, 7% from private nonprofit institutions, and 24% from private for-profit schools were behind on their loan payments. By July 2020, 11.2% of adults with student loan debt reported an inability to make at least one payment that year. Additionally, 20% of Americans with undergraduate degrees and 24% with postgraduate degrees have outstanding student debt. The situation is further complicated by the fact that many students are unaware of their eligibility for income-driven repayment plans on federal loans, with servicers often failing to provide accurate information.
Gender and Racial Disparities
Women, particularly those from minority groups, face even greater challenges in repaying their student loans due to the persistent gender income gap. On average, American Indian or Alaska Native women and Pacific Islander/Hawaiian women have more than $35,000 in student loan debt a year after completing their undergraduate degrees. They often have higher monthly loan payments but lower incomes compared to men, making repayment more difficult.
Intergenerational Concerns
The concern about financial stability due to student loan debt extends beyond individual borrowers. An AICPA survey found that 70% of parents with children who have student loans were very or somewhat worried about their children's ability to repay those loans. Additionally, 53% of those with personal or parent loans reported that these loans affected their ability to save for retirement or other financial goals. This intergenerational impact underscores the far-reaching consequences of student loan debt on financial stability and planning.
Strategies for Repayment
To address these concerns, borrowers can take proactive steps such as creating a financial plan, reviewing loan terms and conditions, and considering budget adjustments to facilitate full and timely payments. Seeking personalized financial planning advice can help individuals navigate their repayment options effectively. Additionally, staying informed about repayment assistance programs and keeping loan providers updated with correct contact information are crucial steps to mitigate the risk of missed payments.
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Frequently asked questions
Around 24% of Americans with student loans that have payments due are behind on their payments.
An AICPA survey conducted in August 2025 found that 74% of Americans with student loans are worried about their ability to pay them back.
Only 38% of borrowers are in repayment and current on their student loans.
More than 5 million borrowers have not made a monthly payment in over 360 days and are in default.
In May 2025, 10.16% of student loan debt was already 90 days or more past due or seriously delinquent.
