Faced With Collections, Borrowers May Prioritize Delinquent Student Loan Repayment: Survey

July marked the fifth consecutive month in which close to one-third of all borrowers were seriously delinquent on their student loans.

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More than 5 million borrowers could soon face stiff penalties from the federal government for delinquent student loans, credit reporting agency TransUnion said on Sept. 25.

In light of pending collections actions, which could include wage garnishment and withholding tax refunds and Social Security benefits, borrowers said they would likely prioritize their student loan payments over other credit accounts, a TransUnion survey conducted from December 2024 to June 2025 found. However, without the threat of collection actions, borrowers often said they would continue to prioritize their mortgages, auto loans, and other forms of debt over their student loans.

Involuntary collections by the U.S. Department of Education (DOE) on student loans that are in arrears were set to begin in May, the agency announced in April. Collections had been halted since March 2020 due to the onset of the COVID-19 pandemic and widespread workplace shutdowns.

Joshua Turnbull, senior vice president and head of consumer lending at TransUnion, said that many borrowers increased their credit obligations during the payment pause, possibly to offset cost-of-living increases or to meet other financial obligations.

“With payments resuming, borrowers are facing a financial reckoning,” Turnbull said.

“Combined with the broader impact of elevated inflation and a higher cost of living, the threat of involuntary collections is causing a potential shake-up amid the traditional payment hierarchy. Many are being forced to make difficult, short-term prioritization decisions as cash flows fail to meet spending and debt obligations.”

According to the DOE, 42.7 million Americans owe a total of more than $1.6 trillion in student loan debt. About 12 percent of borrowers have not made a payment on their student loans in more than one year, and a subset of those borrowers has not made a payment on their student loans in more than seven years.

Only 38 percent of borrowers are current on their student loan payments, the DOE noted, and most of the remaining borrowers are either delinquent or enrolled in forbearance or deferment plans. According to TransUnion, more than half of all borrowers surveyed said they had been skipping their student loan payments because they couldn’t afford them in light of more pressing bills.

The number of student loans in arrears for 90 or more days remained high at 29 percent in July, TransUnion reported. Despite retreating slightly from April’s peak of 31 percent, it still marked the fifth consecutive month in which close to one-third of all borrowers were seriously delinquent on their student loans, TransUnion said.

“We’re closely monitoring this population as they approach default status at 270 days past due, which could trigger involuntary collections,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.

“Once these actions begin, we anticipate that we may see an unprecedented shift in payment hierarchy where student loans are no longer at the bottom.”

In May, the Office of Federal Student Aid (FSA) resumed the Treasury Offset Program and sent notices to all delinquent borrowers to make efforts to either resume payments, enroll in an income-dependent repayment plan, or sign up for loan rehabilitation through the FSA’s Debt Resolution Program.