More than 9 million student loan borrowers are in default, owing a combined $234 billion, and could face wage garnishment or the seizure of federal tax refunds as collections are expected to resume in 2027.
The figures come as borrowers continue to fall behind after pandemic-era protections ended. Collections have been paused several times, most recently in January 2026. Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit that advises borrowers, schools and employers, said she expects collection activity to restart next year.
“It’s heartbreaking. People tend to get caught off guard when their tax refund is taken and if they’re struggling financially, a lot of times they’re counting on that refund to catch up.” — Betsy Mayotte, president and founder of The Institute of Student Loan Advisors
Defaults increased after payments resumed
Student loan defaults began increasing again in late 2025 and early 2026, according to data cited by Stateline. In the first two quarters of 2026, at least 5% of student loans entered default in every state, based on credit-report data from the Federal Reserve Bank of New York. Louisiana and Mississippi recorded default rates of 13% during those two quarters.
A Stateline analysis of Education Department data from the second quarter of 2026 found that more than one-quarter of borrowers in Mississippi, Louisiana and New Mexico were in default. The lowest state rates in the analysis were 15%, recorded in Massachusetts, New Hampshire, Utah and Wisconsin.
- More than 9 million: borrowers in default after the latest data period.
- $234 billion: the collective balance owed by those borrowers.
- At least 5%: the share of loans entering default in every state during the first two quarters of 2026, according to Federal Reserve Bank of New York data.
Older borrowers also show signs of strain
The Federal Reserve Bank of New York’s analysis found that older borrowers appeared to be struggling more than they were before the pandemic. The figures were based on credit reports and covered the first two quarters of 2026.
One borrower described by Stateline, Timothy Varro, 40, has made payments for 10 years but remains unable to keep up with interest on approximately $120,000 borrowed for college in New Jersey and law school in Rhode Island. His experience was included as an example of borrowers facing difficulty even after making payments for an extended period.
Wage garnishment allows loan collections to be taken directly from a borrower’s earnings, while a tax-refund seizure redirects an expected federal refund toward the debt. The collection plans were expected to be announced after the Nov. 3, 2026, midterm elections, Stateline reported, citing coverage by The Washington Sun.
The U.S. Department of Education did not respond to Stateline’s questions about the collection plans. The figures and collection timeline reflect the information available in the coverage published Thursday, Nov. 12.
