The Federal Reserve Bank of New York reported Tuesday that about 2.6 million student loan borrowers who were more than 120 days past due had their loans transferred to the U.S. Department of Education's Default Resolution Group in the first quarter of 2026.
The student loan delinquency rate rose to 10.3% of balances that were 90 or more days overdue, up from 9.6% at the end of 2025. The rate of student loans moving into serious delinquency, measured as a four-quarter moving sum, fell to 10.9% in the first quarter from 16.2% in the fourth quarter of 2025, reflecting a slower pace of new delinquencies relative to the prior year.
Older borrowers, residents of Southern states, and those who had been current on their federal student loans before the pandemic accounted for a disproportionate share of the new defaults, CNBC reported. About 1 million borrowers had fallen into default in the fourth quarter of 2025.
Because a borrower must miss roughly 270 days of payments before a loan enters default status, the fourth quarter of 2025 marked the first time student loan defaults began showing up on credit reports again, according to CNBC. The Covid pandemic triggered a payment pause that lasted more than three years for federal student loan borrowers. Between October 2023 and October 2024, the Education Department also did not report late payments to credit bureaus during an "on-ramp" period.
Despite the rising delinquency figures, the New York Fed said the broader risk to consumer credit markets remains limited. A blog post released alongside the New York Fed report warned that the financial strain on student loan borrowers runs deeper than education debt alone, noting that their "very high delinquency rates across all credit products" are "likely to worsen when collection efforts resume." Even so, the overall footprint of student loan borrowers in U.S. credit markets is modest enough that "spillover from the recent wave of defaults and delinquencies to broader credit markets is likely to be limited," New York Fed economists wrote.
Among the tools available to the federal government to recover defaulted student loan funds are the garnishment of wages, tax refunds, and Social Security payments — though CNBC noted those collection mechanisms have not yet been reactivated.
New York Fed research economist Daniel Mangrum said in a statement that "delinquency transition rates were mostly steady, while student loan delinquencies are returning to pre-pandemic levels."
Across all household borrowing categories, the New York Fed tallied $18.8 trillion in total debt for the first quarter, a gain of $18 billion. Home loan balances climbed $21 billion to reach $13.19 trillion, and credit card debt contracted by $25 billion to $1.25 trillion. Overall delinquency across all debt types held at 4.8%.