More consumers are in delinquency as student loans sour

Late-payment rates among U.S. households remained elevated in the second quarter of 2025, driven in part by another steep slide into serious delinquency by student loan borrowers.

By the end of June, 4.4% of Americans’ total outstanding debt was in some form of delinquency, according to a report Tuesday by the Federal Reserve Bank of New York. That’s up from 3.3% in the year-ago period.

Of the $1.6 trillion of outstanding student loan debt recorded in the second quarter, 12.9% was 90 or more days past due, up sharply from 0.8% in the year-ago quarter. The serious delinquency rate for student loans was also up from the first quarter of this year, when 8% of borrowers were 90 days or more late.

The sharply higher numbers in the first two quarters of 2025 reflect the expiration of pandemic-era federal policies that paused student loan payments. Missed student loan payments that were not reported to credit bureaus between the second quarter of 2020 and the fourth quarter of 2024 are now on credit reports.

“That’s one to watch,” Ted Rossman, a senior analyst at the consumer finance company Bankrate, told American Banker. “And it can have ripple effects, too. If there’s not enough money to pay your student loan, you might fall behind on your auto loan or credit card.”

For now, student loan delinquencies aren’t a huge burden for most banks. More than 92% of all student loan debt is financed by the federal government, not by private lenders, according to the Education Data Initiative.

The percentage of student loan borrowers who have fallen behind on their payments may nudge higher, but the rate of speed at which delinquencies rise could slow down, Rossman said.

“There’s been so much weirdness in that market with the long payment pause and confusion about servicer changes and income-based repayment changes,” Rossman said. “My sense is that the numbers will go a little bit higher, but not as dramatically as we’ve seen.”

Overall, U.S. household debt reached a new high in the second quarter, totaling $18.4 trillion. That’s up $590 billion, or 3.3%, compared with the same three-month period last year.

While student loan balances rose by $53 billion year over year, credit-card balances were up by $67 billion and totaled $1.2 trillion in the quarter, according to the New York Fed report.

From a macroeconomic standpoint, rising credit card balances aren’t necessarily a bad thing, Rossman said. The trend signals population growth and economic growth, he said.

“If balances go up, that means the economy is growing,” Rossman said, noting that more than half of the U.S. population pays off its credit-card balances in full each month.

What’s more, the New York Fed found that the percentage of credit-card borrowers who became 90 days or more past due fell to 6.9% during the second quarter, down from 7.2% in the year-ago period.

JPMorganChase , which has a substantial credit-card portfolio, reported a second-quarter net charge-off rate of 3.4% in its card services unit, down from 3.5% at the same time last year. The banking giant also maintained its full-year net charge-off rate forecast for card services at 3.6%.

“While there are nuances around the edges, consumer credit is primarily about labor markets,” Jeremy Barnum, JPMorgan’s chief financial officer, said last month during the bank’s second-quarter earnings call. “And in a world with a 4.1% unemployment rate, it’s just going to be hard, especially in our portfolio, to see a lot of weakness.”

At Citigroup , credit card trends are also moving in the right direction. During the megabank’s second-quarter earnings call, Chief Financial Officer Mark Mason pointed to a “ticking down” in the percentage of Citi-branded and Citi retail cards that were 90 days or more past due.

“That is largely consistent with kind of pre-COVID seasonality in terms of that delinquency behavior, and so that gives us some confidence on where losses are likely to trend, all things being equal,” Mason said.

Still, “given the uncertainty in the current environment,” there are other factors that Citi is watching, such as the impact of tariffs, the path of interest rates, consumer spending and the unemployment rate, Mason said.

“But net-net is kind of what I alluded to earlier, which is good trends in some of these key indicators,” he said.