Record Student Loan Defaults Surge as Trump Administration Implements New Repayment Plans

The U.S. Department of Education reported 9.16 million federal student-loan borrowers in default in April, up from 7.7 million in December and 6 million in August, meaning about 20 % of the 43 million borrowers are over a year behind; three million are at least 90 days delinquent.

Bloomberg

The four-year COVID-19 collections moratorium ended in early 2026. The Trump administration replaced the Biden-era SAVE plan with two new repayment options, requiring SAVE enrollees—over 7 million—to select a plan by July 1 or be reassigned. The Department also introduced a temporary interest-rate cut for borrowers who enroll in autopay by the deadline.

Bloomberg

The U.S. Department of Education runs the loan program; Under Secretary Nicholas Kent oversees policy; President Donald Trump signed the regulatory changes; the Treasury Department oversees the $1.7 trillion portfolio; and Betsy Mayotte leads The Institute of Student Loan Advisors, a nonprofit that advises borrowers.

Bloomberg

Defaults rose to 9.16 million, with 43 million total borrowers; 20 % are over a year behind and 3 million are 90-day delinquents. Autopay enrollment fell to 40 % from 80 % in 2019. The interest-rate incentive is projected to cost $6 billion over two years.

Bloomberg

Higher defaults raise the chance of wage-garnishment proposals and could strain Treasury’s oversight of the $1.7 trillion portfolio. Larger monthly payments may force borrowers to prioritize other debts, affecting credit markets. The temporary rate cut aims to boost autopay enrollment, though its impact on repayment rates remains uncertain.

Bloomberg

The Department of Education presented the interest-rate incentive as a tool to encourage repayment. Under Secretary Nicholas Kent said the measure is intended to raise repayment rates and improve the overall health of the federal student loan portfolio. Treasury officials noted the $6 billion cost will be absorbed in the department’s budget.

Bloomberg

Betsy Mayotte warned that the rapid shift creates “whiplash” for borrowers, especially those with Parent PLUS loans who may lose income-driven repayment eligibility. Her nonprofit reports a surge in assistance requests, receiving up to 100 emails daily—double the prior year’s volume. She predicts delinquency and default rates will keep rising through the year.

Bloomberg

• “We expect this temporary incentive to drive up repayment rates and significantly improve the overall health of the federal student loan portfolio,” — Nicholas Kent, Under Secretary of Education

Bloomberg

• “For a lot of the people affected, the change in payment amount is enormous,” — Betsy Mayotte, Founder, The Institute of Student Loan Advisors

Bloomberg

The new repayment options become effective July 1; borrowers who have not selected a plan will be reassigned automatically. The Treasury plans to revisit wage-garnishment proposals later in 2026, depending on default trends. Monitoring of autopay enrollment and default statistics will continue throughout the year.

Bloomberg