- Key insight: In research published Tuesday, the New York Fed explored the question of how the end of pandemic-era forbearance on student loans may negatively affect other consumer-lending segments.
- Supporting data: Of the borrowers who defaulted on their student loans in the first quarter of this year, 40% were also delinquent on auto loans, and 57% were delinquent on credit cards.
- Expert quote: “Credit card and student loan delinquencies — both in the low double digits — are the biggest trouble spots,” — Ted Rossman, principal analyst at Bankrate.
Student-loan delinquencies continued to surge in the first quarter, as the effects of pandemic-era forbearance came to a full stop. One key question now is how much spillover there will be into other consumer-lending segments, where banks have a larger presence.
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The 90-day-plus delinquency rate on student loans hit 10.3% last quarter, up from 9.6% in the prior three-month period, according to a report released Tuesday by the Federal Reserve Bank of New York. That rate was just 0.53% in the fourth quarter of 2024, when delinquencies were still being depressed by pandemic-era government policies.
The New York Fed presented mixed data Tuesday on the question of whether the resumption of required payments on federal student loans will stretch a substantial number of borrowers to the point that they stop repaying their auto loans and credit cards.
On the positive side of the ledger, the 90-day-plus delinquency rate for student loans last quarter remained a bit below its level prior to the COVID-19 pandemic. And New York Fed researchers said in a blog post that “the overall scope of student loan defaults is still relatively low, suggesting that fears of broader contagion to other credit products are premature.”
More concerning, the researchers noted that roughly seven million more student-loan borrowers who were part of a now-defunct repayment program will be entering repayment in the coming months. That could lead to what the researchers described as a “second wave of defaults,” after 3.6 million borrowers defaulted on their student loans between October 2025 and March 2026.
What’s more, the research found that large percentages of newly defaulted student-loan borrowers were also delinquent on other debts.
Of the borrowers who defaulted on their student loans in the first quarter of 2026, 40% were delinquent on auto loans, and 57% were delinquent on credit cards.
Those numbers were up substantially from an analysis of student-loan borrowers who defaulted in the fourth quarter of 2019. Back then, 29% of the newly defaulted borrowers were delinquent on their auto loans, and 37% were delinquent on their credit cards.
Ted Rossman, principal analyst at Bankrate, said the New York Fed’s latest findings are further evidence of what has been dubbed the K-shaped economy, with the fortunes of well-paid Americans diverging from those of lower earners. Rossman noted that the delinquency rate on mortgages, which have relatively low interest rates and allow homeowners to build equity, remain around 1%.
“Credit card and student loan delinquencies — both in the low double digits — are the biggest trouble spots,” Rossman said in an email.
The New York Fed’s findings jibe with recent survey results from the American Financial Services Association, a trade group for nonbank consumer lenders, which surveys lenders on a quarterly basis about credit conditions.
The trade group’s latest survey found that overall consumer loan demand decreased in the first quarter, but subprime loan demand rose, as borrowers who were already stretched financially strained further to meet their obligations.
“They’re certainly, I’d say, feeling the financial strain much more than the population in general,” said Tim Gill, chief economist at the American Financial Services Association. “It’s another manifestation, I think, of the K-shaped economy.”
