- Two in three student loans are not actively being repaid, and a quarter of loans requiring repayment are already delinquent.
- A proposed settlement could force 7.7 million borrowers to restart their payments after five years, potentially creating nearly 2 million new defaulters.
- Long-term repayment is becoming increasingly common, with the share of borrowers repaying over a decade almost doubling since 2015.
The vast majority of student loans in the United States remain effectively in abeyance, and delinquencies are rising again new data from the nonpartisan California Policy Lab (PDF file). The analysis, released Wednesday and based on credit bureau data through the third quarter of 2025, offers one of the clearest pictures yet of a reimbursement system under pressure from policy whiplash, legal uncertainty and the lingering effects of the pandemic-era payment holiday.
CPL thinks so only 33% of outstanding student loans are repaid on timethe lowest on-time repayment rate in twenty years, excluding the formal pandemic pause. The rest are in forbearance, forbearance, delinquency or an income-driven repayment plan that does not require any payment.
The share of loans in forbearance or forbearance alone has more than doubled since mid-2023 now accounts for 49% of all loans.
Payment pause that caused chaos
The rising default rates reflect the unusual circumstances of the past five years. Federal student loan repayments were suspended from 2020 through August 2023, followed by a year-long “on-ramp” in which late payments were not reported to credit bureaus. When that grace period ended at the end of 2024, delinquencies soared.
By mid-2025 one in seven borrowers was at least 30 days latethe highest delinquency rate ever recorded in the data CPL tracks. Although delinquencies declined slightly in the third quarter, this shift was largely due to many borrowers turning to forbearance or forbearance rather than resuming their payments. Half of those who came out of arrears did not return to on-time repayments.
The recent spike in administrative forbearance is closely tied to the ongoing legal challenges to the Biden administration’s former SAVE repayment plan. These legal disputes have effectively placed millions of accounts in temporary non-payment status until the courts make a final decision. As CPL notes, this means many borrowers still haven’t faced an actual repayment requirement.
End of SAVE will restart payments for more than 7 million borrowers
A proposed settlement announced this week by the U.S. Department of Education could dramatically change the trajectory of the reimbursement system. Under the terms of the settlement, 7.7 million borrowers enrolled in SAVE who have not made payments since 2020 should resume their payment obligations.
If these borrowers become delinquent at the same rate as current payers, almost 2 million additional borrowers could quickly fall behind, the CPL estimates.
That shift would come at a time when many households are already struggling with higher living costs, rising credit card balances and tighter budgets. CPL warns that financial pressures could increase outwardly, affecting families’ ability to save, pay rent or stay in good standing on other debts.
Longer repayments are becoming the norm
Beyond immediate concerns about delinquency, CPL’s analysis highlights a broader trend: borrowers pay back loans over much longer periods.
The average age of a borrower’s oldest outstanding student loan has increased from 6.5 years in 2015 to 8.9 years in 2025 – an increase of 36%. The share of borrowers repaying loans for more than ten years has doubled in the same period, from 22% to 40%. Repayment terms of more than twenty years, once rare, are now five times more common.
Much of this shift comes from the increasing use of income-driven repayment plans, which typically last 20 to 25 years and require lower monthly payments. Looking ahead, the new Repayment Assistance Plan (RAP) would extend repayment terms to 30 years for many borrowers.
Longer timelines may ease short-term budget pressures but could delay milestones such as home buying, savings and family formation, CPL notes.
What this means for borrowers
The combination of high payment arrears, impending restarts and longer repayment terms indicates that borrowers are facing a volatile year.
Many households may experience financial pressure not only from resumed student loan bills, but also from rising costs in general, including housing, transportation and food. Those placed in administrative forbearance due to legal disputes may be unwilling to resume payments.
Borrowers struggling to restart repayments may need to explore income-driven options, even though these programs are in transition. While they may not be ideal, they are significantly better than defaulting on your student loans.
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