Millions of Student Loan Borrowers Just Defaulted. A Second Wave May Be Coming.

After nearly two years of legal fights and repayment uncertainty surrounding the SAVE plan, New York Fed researchers say millions more borrowers could soon face default.

The latest Household Debt and Credit Report found 3.6 million borrowers entered default between October 2025 and March 2026. Fed researchers say another 7 million borrowers previously enrolled in the now-defunct SAVE plan could still be at risk of default. 

Many borrowers enrolled in the plan were placed into temporary forbearance while legal challenges surrounding the program played out in court. Because many of those borrowers still have not fully resumed repayment, Fed researchers say another wave of defaults may still be ahead.

“Very few have re-entered repayment since missed payments were reported to credit bureaus,” Fed researchers wrote in an accompanying blog post to the report. “This delay means that a second wave of defaults might emerge as these 7 million borrowers reach the nine-month mark in the repayment period.”

What default could mean

Fed researchers report the average credit score for borrowers who defaulted dropped 91 points — falling from 567 to 476 between mid-2024 and late 2025.

For many, that can stop them from qualifying for a car loan, apartment, or mortgage. And that default stays on your credit report for seven years.

The federal government also has tools to garnish wages, seize tax refunds, and even withhold Social Security benefits to collect on defaulted student loans.

For now, those collection efforts remain on hold with no clear timeline for when they resume. But Fed researchers warn that when they do, borrowers who are already struggling to keep up with credit cards and car payments will feel it hardest.

"These high rates suggest that their payment struggles extend beyond student loans," New York Fed researchers wrote, "and are likely to worsen when collection efforts resume."

Nearly 40% were also behind on auto loans and 56% were behind on at least one credit card, their reporting shows.

And they’re not alone

Debt.com recently reported Affordability Fears Are Driving Financial Stress Higher as Mental Health Awareness Month Begins and Credit Card Debt Continues to Climb as Americans Cut Back on Spending.

Multiple new surveys show their financial situation is getting worse and the traditional advice to spend less and save more just isn’t cutting it.

Even Debt.com’s own research shows the share of Americans carrying $10,000 or more in credit card debt has risen to 29%, up from 23% a year earlier.

“When nearly half of those who have maxed out their cards owe more than $10,000 and a staggering 15% are carrying balances over $30,000, we aren’t just looking at a budgeting issue; we’re looking at a financial emergency,” says Howard Dvorkin, CPA and Chairman of Debt.com. “At these levels, the interest alone can become a barrier to financial stability.”

These unprecedented economic times require professional help to get back on track. One call to Debt.com can connect you with a professional who will provide a free debt analysis and help determine the best path forward.