An analysis reveals that 11% of the approximately 350,000 student loan borrowers in California are delinquent on their payments by at least 30 days. Two years after the federal government’s COVID-19 pandemic-era student loan repayment moratorium ended, the lingering effects of economic slowdown and a weakening job market have driven delinquency rates to over three times pre-pandemic levels.

According to a recent report by the California Policy Lab (CPL), a nonprofit research institute at UC Berkeley, 11% of California’s roughly 350,000 student loan borrowers—about one in ten—are at least 30 days behind on payments. This is a striking increase compared to the pre-pandemic average delinquency rate of 3.7%.The delinquency rate is particularly high among Baby Boomers and Generation X, at 12%, while Millennials and Generation Z recorded a relatively lower rate of 9.4%.Experts point out that older generations face a heavier burden, as they often carry not only their own student loans but also loans taken out for their children’s education. The average monthly repayment for Baby Boomers is $101, three times that of Millennials and five times that of Generation Z. Regional disparities are also evident.

Delinquency rates in major metropolitan areas like San Francisco and Los Angeles hover around 10%, while inland, lower-income regions like the Central Valley see rates as high as 16%. This reflects the impact of employment opportunities and income disparities between coastal and inland areas on financial stability. Another notable finding from the report is that the average monthly repayment amount has dropped from $64 before the pandemic to $38 recently. This decline is attributed to some debt forgiveness policies under the Biden administration and increased use of income-driven repayment programs.

However, a recently passed federal budget bill has scaled back existing repayment programs and mandated a shift to a single, less favorable program, likely increasing repayment burdens in the future. The surge in student loan delinquencies is rooted in economic slowdown and a deteriorating job market. As post-pandemic recovery has faltered, job instability has intensified, particularly among low-income and younger borrowers, leading to a direct decline in repayment capacity.

On September 17, the Federal Reserve (Fed) cut its benchmark interest rate by 0.25 percentage points to a range of 4.00–4.25%, the first cut in nine months. In its statement, the Fed noted that “a cooling labor market and slowing consumption are threatening the broader economy.”The student loan issue extends beyond individual debt, acting as a pressure point on regional economies and society at large. Experts warn that “student loan debt has become a structural problem for American households,” noting that “the sharp rise in delinquency rates is not merely a financial risk but a complex result of economic recession, job contraction, and income inequality.

”There are, however, some hopeful signs. The average loan amount for new college borrowers in California has dropped to $13,200, a 23% decrease from last year. This suggests students are opting for more affordable schools or reducing their borrowing. Yet, for graduates already burdened with debt, immediate relief measures are urgently needed. The California Policy Lab emphasized, “This analysis, based on credit agency data, highlights the current state of financial health across generations and regions. The government and financial authorities must not treat the student loan debt crisis as an individual issue but instead develop structural solutions.”

By Hongyong Park