Student loan borrowers pausing payments have doubled since 2024, expert calculates

Over a quarter of federal student loan borrowers, totaling 13.7 million, have suspended payments via forbearance or deferment in Q3 2025, a sharp rise from the prior year. This significant increase stems largely from the repeal of the SAVE plan, leaving many borrowers without affordable repayment options amid escalating living costs. The trend signals widespread financial distress among student loan holders, with accruing interest potentially exacerbating debt burdens and delaying key financial milestones, a situation further complicated by a substantial backlog in Education Department IDR applications.

Analysis

A significant deterioration in the financial health of federal student loan borrowers is evident as of Q3 2025, with over a quarter of the cohort—13.7 million individuals—having suspended their payments. The number of borrowers in forbearance surged to 10.3 million from 2.9 million year-over-year, a direct consequence of the repeal of the Saving on a Valuable Education (SAVE) plan, which had offered substantially lower monthly payments. This policy shift, coupled with a doubling in economic hardship deferments to 100,000, signals widespread financial distress driven by rising living costs. The situation is exacerbated by an operational backlog at the Department of Education, with over 1.3 million applications for alternative repayment plans pending. The continued accrual of interest, estimated at $219 per month for the average borrower, is inflating debt balances, creating a significant headwind for consumer spending and delaying key economic milestones such as homeownership and retirement savings.

Key Decisions for Investors

• Consider underweighting exposure to consumer discretionary sectors, particularly those reliant on large purchases like housing, as the escalating debt burden and payment pauses point to constrained household disposable income.
• Monitor delinquency rates in other forms of consumer credit, such as auto loans and credit cards, as the widespread distress in student loans may be a leading indicator of broader credit quality deterioration.
• Closely track legislative and administrative developments from the Trump administration regarding student loan repayment, as any new policy represents a primary catalyst that could either alleviate or worsen this negative consumer trend.