Student Loan Default Rate: Facts and Statistics

According to the Federal Reserve Bank of New York's Center for Microeconomic Data, at the end of 2021, roughly 3 million people owed more than $86 billion in defaulted student loans.^{Note Reference [2]}

Defaulting on a student loan can result in severe consequences. The government may withhold your wages, and credit-reporting agencies could dock your credit score.

This report describes the state of student loan default in the U.S. We'll cover how many people default after they leave college, how much they owe, and who is most likely to default on student loans.

How Many People Default on Student Loans?

Among all borrowers who entered student loan repayment in 2019, 2.3% (91,475) had defaulted by September 2021, according to the Department of Education (ED).^{Note Reference [1]}

That's a massive drop from prior years. In the last decade, the student loan default rate ranged from a high of 11.8% in 2012 to a low of 7.3% in 2018.^{Note Reference [1]}

One reason behind this drop is likely the student loan payment pause, which the Biden administration announced in March 2020 due to the COVID-19 pandemic. Borrowers who entered repayment as early as 2018 may have been able to avoid default through the moratorium. Student loan payments are scheduled to resume in July 2023.

How Many People Are Currently in Default on Their Student Loans?

By the end of 2021, roughly 3 million people were in student loan default — that's about 7% of all borrowers. Another 270,000 were 90-270 days delinquent on their student loans — meaning they missed a payment but hadn't defaulted yet.^{Note Reference [2]}

The number of student loan borrowers in default has shrunk since its peak in 2016.^{Note Reference [2]}

Student Loan Defaults, Delinquencies, and Rising Loan Balances

Even though most borrowers in 2021 were current on their payments, the majority were sitting on a growing student loan balance. In other words, the amount they owed was larger than the amount they took out.

Defaulted Student Loan Balance Over Time

At the end of 2021, borrowers owed $86.08 billion dollars in defaulted student loans.^{Note Reference [2]}

• The total defaulted student loan balance has dropped significantly since its peak of $128.05 billion in 2018.
• The number of student loan delinquencies has practically flatlined at around $14 million since the start of the student loan payment moratorium in 2020.

Average Student Loan Balance of a Defaulted Borrower

Delinquent and defaulted borrowers actually tend to have lower student loan balances than borrowers in repayment.^{Note Reference [2]}

• In 2021, delinquent and defaulted borrowers' median loan balance was $15,307.
• All other borrowers' median loan balance was $18,767.

One-quarter of delinquent or defaulted student loan borrowers have debt balances under $6,200. That means their balances could be swiped clean if they qualify for student loan forgiveness under the Biden administration's proposed plan — and if the proposal passes its upcoming Supreme Court trial.

Who Is Most Likely to Default on Student Loans?

The likelihood of someone missing payments on their student loans depends on different factors, including what school they attended and if they completed their degree. The student loan default rate also differs across race/ethnicity and income levels.

Student Loan Default Rate by School Type

The three-year student loan default rate is the highest among people who attended private for-profit colleges, and it's been that way for years.

The current three-year student loan default rate is:^{Note Reference [3]}

• 1.7% among borrowers who attended private nonprofit colleges
• 2.4% at public colleges
• 2.9% at private for-profit colleges

Before the student loan default rate took a plunge due to the pandemic-related payment pause, the three-year student loan default rate among borrowers who started repayment in 2017 was:^{Note Reference [3]}

• 6.4% at private nonprofit colleges
• 9.3% at public colleges
• 13% at private for-profit colleges

The National Center for Education Statistics (NCES) reported that more than half (52.5%) of students at for-profit schools who started repaying federal student loans in 2003-2004 ended up defaulting at some point within the first 12 years of repayment. That's about triple the default rate for four-year private schools (17.6%) or four-year public schools (17.4%) during the same period.^{Note Reference [4]}

In 2017, researchers at the Federal Reserve Bank of New York analyzed school and student characteristics that might lead to student loan default. They found that attending a for-profit college was the strongest predictor of student loan default — greater than college completion, major, college selectivity, or a student's income level.^[5]

Likelihood of Student Loan Delinquency by School Type

Borrowers who attend for-profit colleges are also more likely than other borrowers to miss a student loan payment.

Out of all student loan borrowers who attended private, for-profit colleges, 54% were delinquent on a student loan payment at least once in the 12 months after graduation, compared to about 40% of public and private nonprofit school attendees.^[6]

Student Loan Default Rate by Degree

Student loan default rates tend to be lower for people with higher degrees and the highest for people who don't complete a degree or certificate.

NCES reported 12-year federal student loan default rates for folks who entered repayment in 2003-2004. It found:^{Note Reference [4]}

• People who received undergraduate certificates defaulted at higher rates — double the rate of associate degree-completers (44.3% vs. 21.9%) and nearly triple the rate of those with a bachelor's or graduate degree (7.9%).
• People who dropped out had the highest student loan default rates, at 45%.

Likelihood of Student Loan Delinquency by Degree Completion

People who don't complete their degree or certificate are also far more likely to be late on a student loan payment within their first year of repayment.

In 2016-2017, 41.5% of people who did not complete their program had at least one student loan delinquency in their first year of repayment, compared to 25.4% of program graduates.^[7]

Student Loan Default Rate by Income Level

Students from wealthier families are more likely to avoid student loan default.

Forty-one percent of students from the lowest 25% of income-earners went into default at least once 12 years after entering repayment in 2003. That's triple the rate of students from the top 25% of earners.^{Note Reference [4]}

Student Loan Default Rate by Race and Ethnicity

Black and Latino/a students experience the highest barriers to student loan repayment compared to borrowers of other races. Black students face the highest levels of student loan debt by race.

According to NCES survey data of 14,7000 students, among Black bachelor's degree-completers in 2007-2008, about 34% had defaulted on a student loan at least once in the 10 years after graduation. That's more than double the student loan default rate of all bachelor's degree-completers.^[8]

Student Loan Delinquency Rates by State

The Federal Reserve Bank of New York reports states' student loan delinquency rates. The student loan delinquency rate refers to the percentage of student loan borrowers who are currently at least 90 days delinquent.^{Note Reference [2]}

• Southern states, especially Southeastern states, have some of the highest student loan delinquency rates.
• West Virginia, Mississippi, and Kentucky all have student loan delinquency rates of 10% or higher.
• New Hampshire, Nebraska, New York, and Massachusetts have the lowest student loan delinquency rates. All are under 5%.

Frequently Asked Questions About the Student Loan Default Rate

Are defaulted student loans forgiven?

Typically no, defaulted student loans are not forgiven. If you cannot pay, you could face wage garnishment, meaning the government withholds part of your paycheck to pay your balance.

However, if Biden's student loan cancellation plan passes through the Supreme Court, defaulted borrowers could qualify for debt relief.

Are student loans wiped after 25 years?

If you participate in an income-driven repayment plan, you could get your federal student loan debt wiped out after 25 years of on-time payments. Private student loans don't qualify for one of these plans.

What is the biggest single factor contributing to student loan default?

It's tough to pinpoint one factor that causes student loan default. But according to 2017 research by the Federal Reserve Bank of New York, attending a for-profit college strongly predicted the likelihood of defaulting on a student loan. Dropping out of college was the second strongest predictor among the different characteristics they analyzed.^{Note Reference [5]}