Joe Biden’s student loan policies have finally crashed into reality as delinquencies skyrocket tenfold from 0.8% to 8% after the pandemic payment pause ended.
The consequences of this financial day of reckoning include plummeting credit scores, wage garnishments, and tax return seizures, mainly affecting older Americans and those in Southern states.
The Federal Reserve Bank of New York reports that serious student loan delinquencies jumped dramatically in the first quarter of 2025, marking the highest delinquency rate in five years.
This surge follows the end of a 43-month pandemic pause on federal student debt repayment that started in March 2020.
The halt was followed by an additional one-year on-ramp period, during which the government artificially suppressed reporting of missed payments.
The financial impact is devastating for millions of Americans. Roughly six million borrowers are now past due or in default, representing over 10% of all student loan balances.
Credit scores for those in default have plummeted by an average of 63 points, with some borrowers seeing catastrophic drops of up to 175 points, effectively destroying their financial futures.
The hardest-hit areas are seven Southern states with delinquency rates higher than 30%: Mississippi, Alabama, West Virginia, Kentucky, Oklahoma, Arkansas, and Louisiana.
This regional concentration suggests Biden’s policies have disproportionately harmed Americans in red states.
Additionally, borrowers aged 40 and older are suffering higher delinquency rates than those under 40, with the highest rates among those aged 40-49.
LendingTree chief credit analyst Matt Schulz stated:
“The impact that it showed to these people’s credit scores is pretty staggering, that is something that is going to make things harder for people for a long time. There is very little in life that is more expensive than having crummy credit.”
The timing could not be worse for American families already in a struggling position.
Americans now owe a record $18.2 trillion in total household debt, including credit card balances, mortgages, auto loans, home equity lines of credit, and student debt.
Mortgage balances increased by $199 billion in the first quarter alone, further stretching family budgets.
Adding to these woes, the Education Department has now restarted aggressive collection efforts on defaulted student loans.
Beginning May 5, the federal government resumed garnishing wages, seizing tax returns, and taking Social Security payments from defaulted borrowers.
Initially targeting 195,000 borrowers, wage garnishment notices will eventually go out to 5.3 million defaulted borrowers.
“This has been like a car crash unfolding in slow motion…the clock is running out,” said Bankrate senior industry analyst Ted Rossman.
The current crisis stems directly from the Supreme Court’s 2023 decision blocking Biden’s unconstitutional attempt at mass student loan handouts.
After that defeat, the Trump administration has been left to restore repayment discipline.
Education Secretary Linda McMahon has emphasized the need for responsible management of the student loan program as essential for borrowers’ financial health and the nation’s economic outlook.
Overall household debt delinquency rates have risen to 4.3%, driven mainly by student loans, while other debt categories remained relatively stable.
This suggests that the Biden administration’s irresponsible student loan policies are responsible for the current crisis affecting millions of hard-working Americans.
