31% of student loan borrowers with a payment due are in “late-stage delinquency,” or over 90 days past due on payments

With the U.S. Department of Education now resuming “involuntary collections” on federal student loans, millions of borrowers are approaching a looming “default cliff,” according to recent reports.

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A new analysis by TransUnion reveals that, as of April, 31% of student loan holders with payments due are over 90 days behind — classified as being in “late-stage delinquency.” This marks the highest proportion the credit bureau has ever recorded.

Repayment obstacles — including confusion over loan servicers, changing income-driven repayment plans, and unclear loan terms — are pushing more borrowers toward delinquency and eventual default, said Joshua Trumbull, senior vice president and head of consumer lending at TransUnion.

“We don’t think this is the peak,” Trumbull stated. “Defaults are expected to continue rising.”

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Out of the 5.8 million borrowers currently delinquent, nearly a third — around 1.8 million — could hit default status by July, according to TransUnion. Another 1 million may follow in August, with an additional 2 million in September.

Borrowers are officially considered in default, and become subject to federal collection efforts, once they are 270 days past due on payments.

A recent Pew Research Center report also warned of a looming “default cliff,” predicting a coming surge in student loan defaults — a risk to both borrowers’ financial security and taxpayer-funded student loan programs.

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“This wave of defaults is likely to begin in the fall,” said Brian Denton, an officer on Pew’s student loan team.

Borrowers in default face wage garnishment
Federal student loan collection activities were mostly suspended since the pandemic began in March 2020. But Trump administration officials argue that taxpayers shouldn’t be left responsible when borrowers don’t repay their loans.

Collections resumed last month. “Borrowers who fail to pay on time will see a drop in their credit scores and, in some cases, face automatic wage garnishment,” wrote Education Secretary Linda McMahon in an April op-ed in The Wall Street Journal.

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