Record numbers of student loan borrowers are struggling to make their payments, according to a new report.
New Education Department student loan data from the end of last year revealed a record-high combined rate of borrowers in default and serious delinquency, The New York Times reported Friday.
Nearly 25 percent of student loan borrowers are currently in default, Education Secretary Linda McMahon said Thursday. A senior agency official recently told reporters that, as of early March, a total of 9.2 million borrowers were in default and 2.4 million were in late-stage delinquency, according to NPR.
Student loans go into default if scheduled payments aren’t made for at least 270 days, according to the Federal Student Aid website. If a borrower goes more than 360 days without making a payment, the government can “withhold money to collect on the debt you owe,” which could include garnishing wages, the website states.
The total student loan portfolio currently stands at nearly $1.7 trillion.
The Education Department also announced this week it’s handing over a portion of its student loan portfolio to the Treasury Department.
The Treasury Department will “assume operational responsibility for collecting on defaulted Federal student loan debt and provide operational support to [the Education Department’s] efforts to return borrowers to repayment,” agency officials said Thursday in a press release.
In later phases, the Treasury Department will “work to provide operational support over non-defaulted Federal student loan debt,” officials said.
“Under President Trump’s leadership we are undertaking the first serious effort to clean up a $1.7 trillion portfolio that has been badly mismanaged for years,” Treasury Secretary Scott Bessent said in a statement.
“Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars,” he added.
Democratic Representative Bobby Scott, the ranking member of the House Education and Workforce Committee, said in a statement he’s concerned the change could create more confusion for borrowers.
“ED has historically functioned as a one-stop shop for student borrowers, including financial services and advisors to assist with issues,” he said. “Today’s transfer will likely add yet another administrative barrier to borrowers navigating an already opaque student loan repayment process.”
Meanwhile, Republican Representative Tim Walberg, the chair of the House Education and Workforce Committee, called the move “a smart, practical change.”
“Treasury already handles large, complex financial systems, so it’s well positioned to manage student aid more efficiently and responsibly,” he said in a statement. “This shift will simplify how aid is delivered, reduce delays, and make better use of taxpayer dollars.”
The Independent has contacted the Education Department for comment.
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