The Department of Education is warning colleges with high student loan nonpayment that they could jeopardize access to federal financial aid, as the Trump administration confronts rising delinquency among borrowers and renewed scrutiny of how schools prepare students for repayment.
The department issued guidance Wednesday, urging higher education leaders, not just financial aid offices, to strengthen default management and prevention plans and to step up outreach to former students who are delinquent or in default.
Federal Student Aid said updated institution-level "nonpayment rate" data show more than 1,800 institutions at or above 25%.
In that dataset, the nonpayment rate is the share of Direct Loan borrowers, tracked by institution, who entered repayment between January 2020 and May 2025 and were more than 90 days delinquent.
The Education Department said high nonpayment rates can signal future risk under the formal cohort default rate measure that can trigger loss of eligibility for federal student aid programs.
The department said an institution can lose eligibility for federal student aid if its cohort default rate is 30% or higher for each of its three most recent cohort fiscal years, and it can lose Direct Loan eligibility if its cohort default rate is 40% or higher for its most recent cohort fiscal year.
"With nonpayment rates rising at hundreds of colleges and universities across the country, institutions must do more to support successful loan repayment outcomes," Under Secretary of Education Nicholas Kent said.
"Institutions cannot benefit from taxpayer dollars while ignoring the fact that a significant share of their students are not well-prepared to repay their loans. It's time for institutions to step up or risk losing access to federal student aid."
The warning lands as the federal loan portfolio remains large and repayment problems persist.
The Congressional Research Service said nearly 43 million individuals have federal student loan debt, and the federal portfolio exceeds $1.6 trillion.
The department has previously tied rising distress to looming defaults.
In an April 2025 press release announcing a restart of collections on defaulted loans, the department said more than 5 million borrowers had not made a monthly payment in over 360 days and that "there could be almost 10 million borrowers in default in a few months."
In a status report filed Feb. 13 in a federal case brought by the American Federation of Teachers, the department reported 626,412 income-driven repayment applications pending as of Jan. 31, 2026, and 86,520 Public Service Loan Forgiveness buyback applications pending.
Debate is also intensifying over changes to repayment created by President Donald Trump's One Big Beautiful Bill Act, which the department and Federal Student Aid say will drive broader repayment shifts by July 1, 2026.
Analyses by the Institute for College Access and Success say the law's new Repayment Assistance Plan could substantially raise monthly payments for some middle-income borrowers compared with the SAVE plan, including an estimate that a family of four earning $81,000 annually would see a monthly payment rise to $440 from $36.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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