10% of all student loan borrowers over 90 days past due on payments, 1 million defaulted in 2025 Q4

According to the Household Debt and Credit Report from the Federal Reserve Bank of New York, nearly 10 percent of all student loan balances are over 90 days past due. Those in default, over 270 days past due, can have up to 15 percent of their disposable income from wages garnished by the US government to pay back their debts. The government also has the ability to garnish tax refunds as well as Social Security benefits.

Former chief financial officer at the Office of Federal Student Aid Jay Hurt said that the mass default on loans "has very negative consequences for [borrowers]." It also "has negative consequences for institutions of higher education, and regions, and frankly has negative consequences for the economy in general," he added, per NPR.

If the federal government were to start garnishing wages from those who have debt and have not paid it off on time, that may cause a ripple effect in the economy, where there could be a drop in consumer spending as well as a drop in new home sales. According to a report from Fidelity Investments, "Nearly one third (32%) of those currently paying off student loans have delayed purchasing a home due to their debt, and the percentage is even higher among Gen Z and Millennial borrowers – 37% and 36%, respectively."

Although the Trump administration had planned to start garnishing wages on debts in January, midway through the month, the Education Department pulled back the plans. "The Department determined that involuntary collection efforts … will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system," Undersecretary of Education Nicholas Kent said.