The federal student loan default rate rose to 21.3% in the third quarter of fiscal 2026, according to a new report from the Congressional Research Service (CRS). The report says the increase followed a dramatic spike — described as a “default cliff” — in the fourth quarter of fiscal 2025 and links the surge to the end of pandemic-era forbearance, repayment-plan shifts and servicing problems.
What the numbers show
CRS reports the default rate climbed from 11.2% in the third quarter of fiscal 2025 to 18.2% in the fourth quarter of fiscal 2025, then to 21.3% in the third quarter of fiscal 2026. The agency attributes the earlier sharp jump to borrowers re-entering repayment after pandemic relief paused collections and defaults.
| Quarter (fiscal) | Default rate |
|---|---|
| Q3 2025 | 11.2% |
| Q4 2025 | 18.2% |
| Q3 2026 | 21.3% |
Why CRS flags servicing and plan changes
The CRS report raises alarms about loan administration as a driver of defaults. It points to prior findings from the Consumer Financial Protection Bureau that servicers routinely mishandled basic payments, including misreporting amounts. CRS also notes that the Department of Education’s 2023 transfer of servicing rights may have contributed to nearly 2 million credit-reporting errors.
Courts and rule changes have compounded the problem. A March 10 court order has constrained the Education Department’s ability to implement the SAVE income-driven repayment plan and parts of other income-driven programs, the CRS report says. That order requires borrowers who had been in SAVE-forbearance to pick a different repayment plan or be placed into one — a move CRS warns could push borrowers into standard plans with higher monthly payments and greater default risk.
CRS also outlines how statutory changes enacted in 2025, and a Department of Education rule finalized on May 1, 2026 (effective July 1, 2026), repealed some repayment plans and authorized new ones. The agency cautions that shifting millions of borrowers between plans, while required by statute and rule, creates administrative complexity that could lead to further defaults. Borrowers who were in Pay As You Earn or Income-Contingent Repayment must select a new plan by June 30, 2028, under the 2025 changes, CRS notes.
What this means for borrowers and policy debates
- Higher defaults will affect borrowers’ credit records and the overall cost of federal student lending.
- Servicing errors and mass plan transitions could be a source of avoidable defaults if payments are misapplied or enrollments mishandled.
- Court limits on the SAVE plan and other legal developments add uncertainty for millions who relied on income-driven repayment as an affordable option.
The CRS report frames the surge as more than a statistical uptick. It portrays the increase as the combined effect of borrowers returning to repayment after widespread forbearance, court-ordered constraints on income-driven programs and the practical challenges of implementing sweeping statutory changes. The report recommends policymakers and administrators consider whether servicing failures and repayment-plan shifts may drive additional defaults.
For borrowers, the report underscores the fragility of repayment outcomes when administrative errors and sudden policy changes intersect with rising monthly bills. For lawmakers and regulators, CRS signals that the post-forbearance transition remains a critical test of federal loan administration.
