A growing share of Americans are struggling to keep up with student loan payments, pushing the system toward what some experts describe as a “default cliff.” A recent analysis of federal student loan data estimates that more than one in four borrowers—around 12 million people—are delinquent or already in default, a figure drawing concern from both parties as the Trump administration moves toward restarting aggressive collections in early 2026.
The figures come from an analysis by Preston Cooper at the American Enterprise Institute (AEI) and outline the scale of distress across the repayment system. According to the data, about 5.5 million borrowers are in default, 3.7 million are severely delinquent (more than 270 days past due), and another 2.7 million are in earlier stages of delinquency.
A Repayment System Under Heavy Strain
The worsening repayment outlook is unfolding during a period of major disruption in federal student lending. With the court-mandated end of the SAVE repayment plan, roughly 7 million borrowers are being pushed to switch to new options that could mean higher monthly payments. At the same time, Congress has approved changes that would phase out other widely used income-driven repayment plans and replace them with a new, stricter system beginning in July 2026.
Advocates warn that the rapid policy churn is landing hardest on borrowers who were already close to the edge. Persis Yu of Protect Borrowers has cautioned that instability and confusion can tip struggling households into nonpayment. Betsy Mayotte of The Institute of Student Loan Advisors (TISLA) has also warned that the country may be “headed for historic default rates” for an extended stretch.
Wage Garnishment Expected to Return in Early 2026
Adding to the pressure, the Department of Education has confirmed it plans to restart wage garnishment for borrowers in default in early 2026. This allows the federal government to take part of a borrower’s paycheck without a court order, a tool that was paused during earlier moratorium periods. For many households, the return of garnishment could squeeze budgets further, affecting essentials such as rent, utilities, and food.
Will the New Rules Help—or Deepen the Crisis?
The looming policy question for the Trump administration and Congressional Republicans is whether the coming reforms will stabilize repayment or accelerate defaults. One new option, the Repayment Assistance Plan (RAP), aims to keep balances from ballooning by preventing unpaid interest from accumulating for borrowers who make their required monthly payments. But it also stretches the timeline: borrowers could be on the hook for up to 30 years before reaching forgiveness.
Supporters argue the new framework may bring long-term predictability. Critics counter that removing more generous plans, combined with a rocky transition, could cause the number of borrowers falling behind to climb even faster. With millions already late on payments, the shift to a new system may prove especially risky—requiring borrowers to navigate changing rules at precisely the moment many can least afford mistakes.
