For four-and-a-half years, repayment of student loans was "paused" due to the pandemic. That was the excuse given by Joe Biden when, in fact, Biden was trying to buy the votes of 43 million student loan debt holders. He took a big swing when he announced that he was canceling a huge chunk of student loan debt in 2022, only to have the Supreme Court declare his overreach unconstitutional.
Student loan repayment was supposed to begin in October of 2024. The Education Department has yet to update the total statistics on delinquencies, but Nelnet, the largest federal student loan servicer, shared their statistics with the American Enterprise Institute's (AEI) Preston Cooper that show a catastrophe in the making.
The company shows the repayment statuses of the roughly 13 million borrower accounts they handle. Before the pandemic, 60% of student debt was being repaid, but the figure as of February 2025 is less than 40%. Repayment rates have not risen above 40% for five months, currently standing at 38%.
It's not just debtors refusing to repay any of their debt. There's the 41% of borrowers who are in deferment or forbearance. Many of these borrowers are enrolled in Biden's "Saving on a Valuable Education" (SAVE) Plan. While that plan is being challenged in court (and it will almost certainly be declared unconstitutional), borrowers are spared defaulting on their loans. But once the court cases are completed, the borrowers will be forced to start repaying their loans again.
Another 14.4% of borrowers are 91 days in arrears, while 5.6% are delinquent 90 days or less.
The bottom line with these delinquencies is the precipitous drop in a borrower's credit score. The refusal to pay may be due, in part, to borrowers being unaware that they were supposed to begin paying again, "losing touch with their loan servicers, and disengaging from the repayment system," writes Cooper in AEI.
That still won't help their plunging credit scores.
About 63% of student loan borrowers have not reduced their balance since payments restarted in 2023, the New York Fed says — a hint that borrowers are not repaying their loans at the same rate as before the pandemic.
The New York Fed estimates that 9 million student loan borrowers will see their credit score plummet in the first half of this year.
After an extended reprieve, borrowers who miss payments risk a knock to their credit score that likely got a big boost during the pandemic forbearance.
If current prime and subprime borrowers overwhelmingly miss payments, the overall drop in credit scores among student loan borrowers could be much larger — resulting in potentially less borrowing (and possibly less spending) among this subset of Americans.
