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Millions of student loan borrowers have recently defaulted on their loans, according to new data from the Federal Reserve Bank of New York.
Roughly 1 million borrowers fell into default during the fourth quarter of 2025, and another 2.6 million borrowers did so in the first quarter of 2026, the New York Fed reported in a blog post on Tuesday.
The new defaults were concentrated among older borrowers, those in Southern states and people who were not behind on their federal student loans prior to the pandemic, the researchers wrote.
The researchers also said that “a second wave of defaults might emerge” as millions of borrowers who enrolled in the now-defunct Biden-era Saving on a Valuable Education plan are forced to begin repayment. A federal appeals court ended the SAVE plan earlier this year. Borrowers who signed up for SAVE have been excused from making payments since the summer of 2024.
Defaults may ‘reverberate through the credit space’
The rise in student loan defaults comes as more borrowers must resume payments after years of relief.
For over three years, the more than 40 million people holding federal student loans didn’t have to make payments because of the Covid pandemic. Then, between Oct. 2023 and Oct. 2024, the U.S. Department of Education still did not report late payments to the credit bureaus during an “on-ramp” period.
Student loan defaults appeared on consumers’ credit reports for the first time again in the fourth quarter of 2025, New York Fed researchers noted, since it typically takes 270 days of missed payments for the debt to enter that status.
Roughly 7.7 million student loan borrowers were in default prior to the pandemic, according to Education Department data.
“The ripples from this wave may continue to reverberate through the credit space if the financial struggles from defaulted loans spill over into family members’ credit profiles, and when collections on defaulted loans eventually resume,” the New York Fed researchers wrote.
The federal government has extraordinary collection powers on its student loans and it can seize borrowers’ tax refunds, paychecks, and Social Security retirement and disability benefits. But for now, that collection activity remains on hold.
This is a developing news story. Please check back for updates.
