Almost 9 million Americans are missing student loan payments — and one factor is to blame

President Trump has already made it clear that his administration aims to end a major student loan forgiveness program. Now, millions of borrowers are missing payments on federal student loans. Nearly 9 million Americans are at least one payment behind, leading to increased risks of default. The Financial Times has reported that the current delinquency numbers have escalated to $1.7 trillion. “They just don’t have the money,” Charlie Wise, senior vice-president and head of global research and consulting at credit bureau TransUnion, stated. “That speaks more broadly to some of the weaknesses that we’ve seen in the jobs market for recent grads," he added.

The difficulty faced by recent graduates in landing jobs is one of the primary reasons for the rise in student loan defaults. According to a TransUnion survey, a quarter of participants were waiting for updates on alternatives to forgiveness, and nearly half of those who were having trouble making payments cited affordability concerns. It has been estimated that $200 is the median monthly payment for student loans. 

With 9.6% of the $1.65 trillion student debt over 90 days past due, the FSOC said that over 9 million borrowers have slipped into delinquency since credit reporting commenced. This represents a considerable rise from 0.5% a year ago. Student loans are a notable exception to the low default rates observed in other consumer loans, according to the Financial Stability Oversight Council (FSOC). 

However, defaults have historically been more common; since the forbearance started in early 2020, the percentage of debt over 30 days past due has doubled. Although necessary, the Biden administration's patience throughout the pandemic caused delays in the resumption of payments, with late payments only impacting delinquency starting in September 2024. Due to overshooting pandemic stimulus efforts, analysts have observed a persistent reluctance to resume payments. As per Yahoo Finance, the New York Fed's latest household debt and credit report indicates a significant rise in student loan delinquencies, with 7.74% of student debt reported 90 or more days delinquent in the first quarter, up from less than 1% the previous quarter. This surge follows the Department of Education's decision to resume reporting missed payments to credit bureaus after a five-year hiatus.

Approximately one in four students with a loan is currently delinquent, with nearly one in ten seriously delinquent. Experts warn of potential spillover effects on other debts, as rising student loan delinquencies correlate with increases in delinquencies across other loan types, including credit cards and auto loans. CBS Evening News reported that recent college graduates are facing a surge in unemployment, which has reached 6.6%, surpassing the national rate. Economists attribute this to businesses increasingly replacing entry-level positions with artificial intelligence (AI), particularly in tech.

Experts suggest that educational systems should focus on lifelong learning to adapt to the evolving job market. Overall, the job market is tightening, with increased competition for fewer entry-level roles. Hence, without an income source, student borrowers are finding it increasingly difficult to pay off their federal debt on time.

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