Student loans have hit an all-time high, as 9.5 million borrowers with past-due payments over 270 days old are in default. According to data from the Office of Federal Student Aid, the 9.5 million defaulted borrowers represent more than 20 percent of all federal student loan borrowers. Of the $1.7 trillion of federally-backed student loans in the U.S., $233.3 billion is in default.
“Folks are struggling to make ends meet and cover all the rising costs of everything else. The growing student loan bills are making things worse, and folks are falling behind,” said Aissa Canchola Bañez, policy director for the advocacy group `Protect Borrowers.
The SAVE plan was put in place to avoid this outcome for many college graduates as the Biden administration provided a one-year buffer period that ended in the fall of 2024. Now, with the Trump administration striking down the plan, 1 out of 5 borrowers are 9 months behind on payments, suffering from lower credit scores due to late payments, and face the possibility of having their wages garnished in this crisis of an economy. During this time, loans can not be reinstated into default, and new borrowers will pick between one standard repayment plan and one income-driven option, as opposed to having several options. The Education Department has described the changes as a simplification of a “fragmented and confusing” system.
Another confusing part is that most borrowers live in southern states, the same ones that overwhelmingly voted for Trump to be president. According to AP analysis, Mississippi has the nation’s highest default rate at 28.3 percent, and others near the top include Louisiana, Alabama, West Virginia, Oklahoma, Georgia, South Carolina and Texas. Rounding out the 15 states with the highest default rates are Alaska, Arizona, Ohio, Indiana, Michigan, New Mexico and Nevada.
“These are folks who live in states that President Trump won in the previous election,” Bañez said. “And why I bring that up is, you know, there’s a lot of misconceptions and tropes about who student loan borrowers are, and who are the ones who are falling behind.”
