AASCU Federal Highlights – February 2026

Student Loan Processing Backlogs, Rising Borrower Default Rates, and High Institutional Nonpayment Rates, All Pointing to a Likely Rise in Cohort Default Rates

Last week, the Federal Reserve Bank of New York published a report indicating that approximately one million student loan borrowers defaulted on their federal student loans last year, and the student loan delinquency rate remains high (at 9.6%). In a court filing, ED also released data revealing that, while it has made some headway in processing Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) applications, a significant backlog remains, totaling 626,412 IDR applications and 86,520 PSLF Buyback applications.

Moreover, with the Saving on a Valuable Education (SAVE) plan set to end, over seven million federal student loan borrowers will have to transition to a new IDR plan, likely compounding on this backlog issue. The exact date at which SAVE plan enrollees will be required to transition to a new IDR plan has not yet been set. Given the increase in student loan borrower default rates and the backlog of IDR and PSLF applications, AASCU expects institutions to see higher cohort default rates, with the official public release of these rates slated for September.

Similarly, yesterday, ED shared new data showing that over 1,800 institutions have nonpayment rates at or above 25%. Nonpayment rates are defined as the percentage of Direct Loan borrowers, on an institutional basis, who entered repayment between January 2020 and May 2025 and whose federal student loans were more than 90 days delinquent. While nonpayment rates are distinct from default rates (which are defined as 270 days of delinquency), this measure raises concern that institutions are moving toward higher default rates. AASCU will continue to monitor these developments.