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Student loan delinquencies are surging across the United States, but the crisis is hitting Southern states especially hard.
According to recent data from the New York Federal Reserve Bank, seven Southern states now lead the country in overdue student loans, with more than 30 percent of borrowers in each of those states at least 90 days behind on payments.
In Mississippi, nearly 45 percent of borrowers have a delinquent loan, the highest percentage in the country. Alabama follows with 34.1 percent, and West Virginia rounds out the top three at 34 percent. These figures reflect a broader concern over how rising repayment burdens are colliding with regional economic disparities and the expiration of federal protections.
The Department of Education recently confirmed that two in every ten borrowers nationwide are currently over 90 days late on at least one student loan. This sharp increase follows the end of a federal "on-ramp" policy, which temporarily shielded borrowers from negative credit reporting during the initial return to repayment in 2023.
Now that the protection has ended, borrowers are starting to see the real impact on their credit scores - a development that could have wide-reaching consequences for their financial lives.
"Anecdotally speaking, there are a lot of borrowers who found out about payment presumptions or payment reporting of delinquencies via an alert from their bank that their credit score dropped," New York Fed officials said in a call with reporters. "Many of them may have had the money to make these payments and just didn't know that they needed to be making them."
Financial penalties now replacing flexibility
Borrowers who didn't know their payments had resumed are now facing major financial setbacks. A damaged credit score can lead to higher interest rates on new loans, reduced access to credit cards or mortgages, and other financial barriers that can take years to correct.
And the stakes are rising fast. Beginning this summer, the federal government will once again have the authority to garnish wages from borrowers who remain delinquent. This means the Department of Education could withhold a portion of borrowers' paychecks to collect past-due amounts, a move that will further burden those already struggling with inflation and other economic pressures.
The resurgence in student loan debt challenges comes at a time when federal relief efforts have either expired or stalled in Congress. While President Biden has taken executive action to cancel some debt and restructure repayment programs like the SAVE Plan, many borrowers-especially those in lower-income states-remain in limbo.