Student loan defaults are rising. What borrowers should know before it’s too late.

The so-called student loan default cliff is here.

Following a rise in federal student loan delinquencies over the past year, approximately 1 million borrowers’ loans went into default at the end of 2025, according to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York.

And those defaults could continue to increase over the next few months. Overall, 9.6% of student loans are 90 or more days delinquent, with an increasing number of balances moving into serious delinquency.

Whether you’re trying to avoid default status or recover from a default, knowing your options can help you figure out the best path forward.

Read more: How to pay off student loans quickly — 8 strategies that work

A major part of the rapid increase in delinquencies — leading to defaults — is what the New York Fed calls the “continued effects from the resumption of payment reporting following the extended pandemic forbearance period.”

After years of forbearance starting during the COVID-19 pandemic, federal student loans payments resumed for many borrowers in 2023. Following that, there was a one-year on-ramp period during which late or missed payments were not reported to the credit bureaus. That on-ramp ended in September 2024.

Since then, more and more borrowers have entered delinquency.

By June 2025, Federal Student Aid data showed that 34.4% of federal student loan recipients (more than 6 million) were more than 30 days delinquent. Of those 6 million borrowers, more than 4 million were in serious delinquency and at risk of defaulting in the next six months.

Quarterly Household Debt and Credit data paints a similar picture of accounts flowing into serious delinquency throughout 2025. The number of accounts making that transition was just 0.70% at the end of 2024, but rose to 12.88% by the second quarter of 2025, 14.26% in the third quarter of 2025, and reached a high of 16.2% by the last quarter of 2025.

Now, it’s been more than a year since federal student loan reporting restarted, and lasting delinquencies are reaching default status.

Student loan delinquency can happen quickly. Technically, your federal student loan is considered delinquent the first day after you miss a payment.

Once you miss a payment, the best thing you can do is work to pay it back as quickly as possible. If you’re missing payments because you can no longer afford them, consider switching to a different repayment plan or seeing if you qualify for deferment or forbearance relief.

If you don’t take action, your delinquent account can have longer-lasting consequences after 90 days, when the loan enters serious delinquency.

That’s when the delinquency may start affecting your credit score. After 90 days, your loan servicer will begin reporting the delinquency to the credit bureaus — which could lead to an average credit score drop as high as 171 points, according to a New York Fed report.

Finally, you’ll reach default status if you continue not to take action on delinquent loans.

For the most common types of federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans, you’ll be considered in default if you don’t make a payment for at least 270 days. That’s about nine months of missed loan payments.

In addition to the credit score impact, defaulting can have some major consequences. You’ll be ineligible for deferment, forbearance, and any additional federal student aid, and your entire loan balance will be immediately due.

Defaulting on your student loan can also lead to involuntary collections from your wages or tax refund. For now, the U.S. Department of Education has delayed those collections to “enable the Department to implement major student loan repayment reforms” passed into law last year. However, the department calls the delay temporary — meaning wage garnishment should still be a concern for any defaulted borrowers.

Read more: After Trump’s budget bill, are federal student loans still the gold standard?

If your federal student loans do go into default, there are two primary paths you can take: loan rehabilitation or loan consolidation. Before you decide, reach out to your loan servicer to find out which options might be best for your individual situation. Here’s a rundown of both options.

Read more: How to get student loans out of default

Loan rehabilitation involves making a series of on-time monthly payments toward your loan.

For the most common types of federal student loans, you must agree (in writing) to make nine reasonable monthly payments within 20 days of each due date and then make those nine payments over 10 consecutive months. The reasonable monthly payment is equal to 10% or 15% of your annual discretionary income, divided into 12 monthly payments.

Right now, loan rehabilitation is a one-time resource. Starting in 2027, you’ll get another second chance to rehabilitate a defaulted loan. After you complete the rehabilitation program, your loan will be out of default, and you’ll be eligible for deferment, forbearance, loan forgiveness, and other federal loan benefits.

You can also consolidate your student loans into a Direct Consolidation Loan. This new loan will include your principal loan balance and the interest you’ve already accrued.

If you choose consolidation to get out of default, you must either agree to repay your consolidated loan under an income-driven repayment plan or make three consecutive, on-time payments (a reasonable amount as determined by your loan holder) toward your defaulted loan before consolidating to the new loan. If you choose the latter option, you can repay the new, consolidated loan using any repayment plan you qualify for.

Once your loan is consolidated to the new Direct Consolidation Loan, you’ll again be eligible for federal loan benefits, including deferment and forbearance.

See if student loan refinancing could help you better manage your debt:

A major difference between these options is the effect they can have on your credit score.

If you choose loan rehabilitation and complete the program, the record of default from your loan will be removed from your credit. With loan consolidation, that record will remain on your credit history.

Under either plan, the missed payments reported to the credit bureaus before your loan entered default (during delinquency) will also stay on your credit history.