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As Wage Garnishment Looms, Federal Student Loan Borrowers Indicate They Could Prioritize Their Student Loans Ahead of Credit Cards and Personal Loans

By: TransUnion via GlobeNewswire

September 25, 2025 at 08:00 AM EDT

CHICAGO, Sept. 25, 2025 (GLOBE NEWSWIRE) -- Millions of delinquent federal student loan borrowers are bracing for the possible resumption of involuntary collections by the U.S. Department of Education, such as wage garnishment or the withholding of tax refunds or Social Security benefits. A new survey from TransUnion (NYSE: TRU) highlights a growing concern related to this issue.

When asked about the prospect of prioritizing student loan payments with their existing credit accounts, federal student loan borrowers indicated they intend to pay their mortgage and auto loans first. However, in the face of involuntary collections, they prioritized their student loan payments ahead of credit cards and personal loans.

An early examination of delinquent federal student loan borrowers across the credit portfolio over the period from December 2024 to June 2025 supports this sentiment. While serious delinquency rose across each of these credit products among the delinquent student loan population, the rate of growth was generally aligned with the priorities reflected in the survey. Secured products, such as mortgages and auto showed a significantly lower increase in delinquencies than unsecured personal loans and credit cards.

Delinquency for Auto and Mortgage Among Seriously Delinquent Federal Student Loan Borrowers Increased at a Slower Rate Than Unsecured Personal Loans and Credit Cards

Timeframe/Credit Product	Mortgage	Auto	Unsecured Personal Loans	Credit Card
Serious DQ Rate* Dec. 2024	4.67%	3.78%	3.33%	1.03%
Serious DQ Rate* June 2025	5.59%	6.30%	9.50%	5.96%
Growth Rate	+20%	+67%	+186%	+479%

_{*Serious DQ is 60+ DPD for unsecured personal loans and auto, 90+ DPD for credit card and mortgage}
^{Source: TransUnion US consumer credit database}

It is worth noting that these delinquency figures noted in the table above only apply to the population of seriously delinquent student loan borrowers, which represents just over five million of the more than 200 million credit-active U.S. consumers.

“During the extended federal student loan payment pause, many borrowers took on additional credit—possibly to manage rising living costs or other financial obligations,” said Joshua Turnbull, senior vice president and head of consumer lending at TransUnion. “Now, with payments resuming, borrowers are facing a financial reckoning. Combined with the broader impact of elevated inflation and a higher cost of living, the threat of involuntary collections is causing a potential shake-up amidst the traditional payment hierarchy. Many are being forced to make difficult, short-term prioritization decisions as cash flows fail to meet spending and debt obligations.”

As part of the same TransUnion survey, nearly half of federal student loan borrowers currently missing payments indicated they were not making those payments simply because of affordability concerns. Another one-third responded that they were being forced to make the tough decision to prioritize other bills ahead of repaying their student loans. These challenging decisions are likely to persist for at least the short term, as the percentage of federal student loan borrowers reported as seriously delinquent has remained stubbornly high in recent months.

The most recently available data for July 2025 revealed that 29.0% of federal student loan borrowers in repayment—or 5.4 million individuals—were reported to be 90 or more days past due (90+ DPD). This is essentially flat compared to June 2025. While slightly down from its peak of 31.0% in April 2025, this nevertheless marked the fifth consecutive month in which more than five million federal student loan borrowers were 90+ DPD.

“While the percentage of federal student loan borrowers who are seriously delinquent has slightly subsided in recent months, it continues to remain decidedly elevated,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “We’re closely monitoring this population as they approach default status at 270 days past due, which could trigger involuntary collections. Once these actions begin, we anticipate that we may see an unprecedented shift in payment hierarchy where student loans are no longer at the bottom.”

Lenders seeking to stay fully abreast of the true risk of the federal student loan borrowers in their portfolios can leverage TruVision Premium Student Loan Attributes as part of their regular portfolio reviews. TruVision Premium Student Loan Attributes enables lenders to view details on student loan types, balances, and payment histories, helping them identify impacted consumers.

About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good^® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business