Monday marks the end of a five -year stay for federal student loan borrowers, while the Trump administration is starting to put millions of default borrowers in collections. For some, this will mean the wages seized and the credit ratings in falling nearly 200 points.
The Ministry of Education has not received on the default loans since March 2020, when a multitude of modifications have been made to the collection and billing of loans to help borrowers during the COVID-19 pandemic. From now on, the Trump administration takes over the practice and threatens to garnish wages, tax reimbursements and the federal advantages of borrowers – such as Social Security – at a time when Americans are already in difficulty in the midst of high prices and generalized economic uncertainty linked to chaotic tariffs of President Donald Trump.
Actions could financially hide an unprecedented number of borrowers. According to a new report From the transunion of the credit office, more than one in five borrowers risk of default on their loans, a higher share than pre-countryic.
In fact, transunion analysis reveals that 20.5% of borrowers have a payment of 90 days or more due, against only 11.5% of borrowers in February 2020. “The current delinquency rate represents the highest figure ever recorded,” reports Transunion. And it could be more widespread than it seems.
“More than one borrower of student loans in five with a payment due was very delinquent, but this figure can actually be much higher,” said Michele Raneri, vice-president and responsible for transunion research, in a press release.
Indeed, there are many borrowers who may not make payments but who are not currently considered offenders, including current students and those who have a postponement or a presumption, explains Randeri.
Consult this interactive table on Fortune.com
Those who have faced a defect since the end of President Joe Biden’s so-called reimbursement ramp, a period of one year for borrowers during which missed payments were not declared credit offices, saw their credit ratings down an average of 63 points, according to the report.
But the impact was “significantly higher” for those who have higher credit scores than those who have lower scores, notes transunion; They saw their credit scores fall on average 175 points. About a quarter of borrowers who experienced a defect in January and February, 23%, had at least one credit rating, which generally refers to an FICO score between 660 and 719.
That said, subprime borrowers, those with Fico scores between 300 and 600, saw the highest percentage of borrowers seriously delinquent in February 2025, with 51% at least 90 days later. It is a spectacular increase of 39% in February 2020.
The own figures of the Department of Education put the share of borrowers at the risk of even higher collections: more than 5 million borrowers have not made a monthly payment in more than 360 days and are currently in default, while 4 million borrowers are late and on the grounds to be under default. This represents almost 25% of all federal borrowers.
When a creditor sends the default debt to the collections, he can wreak havoc on the finances of a borrower. Already, Recent research From the American federal reserve noted that more than 9 million borrowers “will be faced with significant reductions on the credit rating once the delinquations appear on credit reports in the first half of 2025.” In the summer, some borrowers could see automatic deductions from their pay checks on a debt, failing that, putting even more pressure on an already unstable economy.
This story was initially presented on Fortune.com
