Monday marks the end of a five-year reprieve for federal student loan borrowers, as the Trump administration begins to put millions of defaulted borrowers into collections. For some, that will mean seized wages and credit scores plummeting by almost 200 points.
The Department of Education has not collected on defaulted loans since March 2020, when a host of changes were made to loan collection and billing to help borrowers during the COVID-19 pandemic. Now, the Trump administration is resuming the practice and threatening to garnish defaulted borrowers’ wages, tax refunds, and federal benefits—such as Social Security—at a time when Americans are already struggling amid high prices and widespread economic uncertainty related to President Donald Trump’s chaotic tariff policies.
The actions could financially hobble an unprecedented number of borrowers. According to a new report from credit bureau TransUnion, more than one in five borrowers are at risk of defaulting on their loans, a higher share than pre-pandemic.
In fact, TransUnion’s analysis finds that 20.5% of borrowers have a payment 90 days or more past due, compared with just 11.5% of borrowers in February 2020. “The current rate of delinquency represents the highest figure ever recorded,” TransUnion reports. And it could be more widespread than it looks.
“More than one in five student loan borrowers with a payment due have been reported as seriously delinquent, but this figure may in fact be much higher,” said Michele Raneri, vice president and head of research at TransUnion, in a press release.
That’s because there are many borrowers who might not be making payments but are not currently considered delinquent, including current students and those in deferment or forbearance, says Raneri.
Those who have faced default since the end of President Joe Biden’s so-called on-ramp to repayment, a one-year grace period for borrowers during which missed payments were not reported to credit bureaus, have seen their credit scores drop by an average of 63 points, according to the report.
But the impact was “significantly greater” for those with higher credit scores than those with lower scores, TransUnion finds; they saw their credit scores plummet an average of 175 points. Around a quarter of borrowers who experienced default in January and February, 23%, had at least a prime credit score, which generally refers to a FICO score between 660 and 719.
That said, subprime borrowers, those with FICO scores between 300 and 600, saw the highest percentage of seriously delinquent borrowers in February 2025, with 51% at least 90 days past due. That’s a dramatic uptick from 39% in February 2020.
The Education Department’s own figures put the share of borrowers at risk of collections even higher: More than 5 million borrowers have not made a monthly payment in over 360 days and are currently in default, while 4 million borrowers are in late-stage delinquency and on their way to being in default. That is almost 25% of all federal borrowers.
When a creditor sends defaulted debt to collections, it can wreak havoc on a borrower’s finances. Already, recent research from the U.S. Federal Reserve finds that more than 9 million borrowers “will face significant drops in credit score once delinquencies appear on credit reports in the first half of 2025.” By the summer, some borrowers could see automatic deductions from their paychecks on defaulted debt, putting even more strain on an already unstable economy.