Millions of student loan borrowers fell into default earlier this year — and a second wave of delinquencies could be on its way, the Federal Reserve Bank of New York said Tuesday.

About 1 million borrowers fell into default in the fourth quarter of 2025 and another 2.6 million did the same in the first quarter of this year, Fed researchers wrote in a blog post.

The share of overdue student loan balances is returning to pre-pandemic levels as repayments resume after a three-year pause, the researchers said. 

About 7.7 million student loan borrowers were in default before the COVID outbreak, according to the Department of Education.

The average borrower entering default is around 40 years old and was not past due on their loans prior to the pandemic, according to the blog post. They’re more likely to live in the South, too.

During the pandemic, payments were paused and interest was slashed to 0% for the more than 40 million people holding federal student loans. Borrowers were not required to make payments for more than three years as the freeze was repeatedly extended.

Though the pause officially ended in September 2023, there was an “off-ramp” period when the Department of Education did not report late payments to credit bureaus. 

Since it takes 270 days of missed payments to enter default, the fourth quarter of 2025 was the first period when new defaults began appearing on credit reports.

New York Fed researchers warned a second wave of defaults may be coming as borrowers in the now-defunct SAVE plan are forced to resume repayments. 

A federal appeals court ended the Biden-era Saving on a Valuable Education plan earlier this year. As the plan made its way through the courts, roughly 7 million borrowers were excused from making payments since the summer of 2024.

The largest wave of student loan delinquencies has likely passed, according to the researchers. 

“But the ripples from this wave may continue to reverberate through the credit space if the financial struggles from defaulted loans spill over into family members’ credit profiles, and when collections on defaulted loans eventually resume,” they wrote.

Defaulted student loan borrowers are more likely to be past due on other forms of debt, according to the blog post.