New data: 1 in 10 Alabama student loan borrowers has defaulted on their debt in the past year

MONTGOMERY, Ala. (WSFA) - New federal data shows one in 10 Alabamians defaulted on their student loans in the past year; it is one of the highest rates in the country.

According to the New York Fed Consumer Credit Panel, Alabama, Mississippi, Georgia, South Carolina and Louisiana all had more than 10% of borrowers default on their loans in the fourth quarter of 2025 or the first quarter of 2026.

In May, one in four Alabama borrowers were at least three months late on their loans.

As of March, nearly 170,000 borrowers across the state owed more than $4 billion on defaulted direct loans.

During the COVID-19 pandemic, there was a pause on student loan payments. However, that grace period ended in June 2025.

“It seems important to me that if we have people who have done everything that they can get admitted to college, they have the good grades in high school, we as a state should get the educational skills that we need for our workforce and the economy,” said Dr. Jim Purcell, executive director of the Alabama Commission on Higher Education.

Purcell said the state has been trying to provide more support to students, but there is still room to improve.

“This next legislative session will be a tight budget year, and we need to consider how much of our needs-based aid can we increase during that period of time,” he said.

While there was a pause in the past on repayments during former President Joe Biden’s administration, Purcell discourages borrowers from waiting for relief from Washington, D.C.

More information about loan repayment plans, including rates based on income, can be found on the Federal Student Aid website.

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