"Student Loan Delinquency Rates Soar in Southern States: New York Fed Report"
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"Student Loan Delinquency Rates Soar in Southern States: New York Fed Report"
[!CDATA[Several states in the South have some of the highest rates of student loan delinquency, as shown on a map created by researchers at the Federal Reserve Bank of New York. Approximately 5.3 million borrowers are in default on their federal student loans, while an additional 4 million are behind on payments. Due to the COVID-19 pandemic, federal student loans, including those in default, had not been sent for collection since March 2020. However, the Department of Education recently announced that it would resume collection efforts, including wage garnishment for potentially millions of borrowers. The delinquency rate for student loan balances significantly increased after a pause on reporting delinquent federal student loans ended, according to a report from the New York Fed. In the first quarter of 2025, about 7.7 percent of aggregate student debt was 90 or more days delinquent, a stark rise from less than 1 percent in the previous quarter. Researchers estimated that approximately 13.7 percent of borrowers, equivalent to around six million Americans, had a loan that was nine or more days past due or in default during the same period in 2025, similar to the figures from 2020. After excluding borrowers not in repayment or with a zero-dollar monthly payment, researchers identified seven states with a conditional borrower delinquency rate above 30 percent. These states include Mississippi (44.6 percent), Alabama (34.1 percent), West Virginia (34.0 percent), Kentucky (33.6 percent), Oklahoma (33.6 percent), Arkansas (33.5 percent), and Louisiana (31.8 percent). On the other hand, states with rates below 15 percent include Illinois (13.7 percent), Massachusetts (14 percent), Connecticut (14.5 percent), Vermont (14.7 percent), and New Hampshire (14.8 percent). Daniel Mangrum, a Research Economist at the New York Fed, noted that transition rates into serious delinquency have stabilized for credit card and auto loans over the past year. However, the reporting of past-due student loans in the first quarter of 2025 led to a significant increase in seriously delinquent borrowers. This situation could potentially impact borrowers' credit standing, leading to higher borrowing costs or restricted access to credit for mortgages and auto loans. Secretary of Education Linda McMahon emphasized the need to address the broken higher education finance system, which has contributed to rising tuition rates without ensuring that students receive a valuable education. The Department of Education has initiated involuntary collection efforts through the Treasury Department's offset program, withholding government payments from individuals with overdue debts. Additionally, wage garnishment for borrowers in default will commence later this summer. The impact of these measures on borrowers and the broader credit market remains uncertain, as millions of individuals navigate the challenges of student loan debt and repayment.]]