The news: Federal student loan borrowers may be prioritizing student loan repayments ahead of their credit cards and personal loans as the threat of wage garnishment creeps closer, per a TransUnion survey.

The growth rate for serious delinquencies YoY for unsecured personal loans and credit cards held by seriously delinquent federal student loan borrowers soared 186% and 479% from December 2024 to June 2025. 

Sense of scale: 29% of federal student loan borrowers in repayment—5.4 million consumers—were 90+ days delinquent in July, per TransUnion data. 

Why this matters: Student loans jumping to the forefront of consumers’ debt repayment priorities represents a rescrambling of payment hierarchies for many US adults, who typically focus on paying down or staying on top of mortgages, auto loans, and personal loans, per FICO data. 

Gen Z impact: For younger generations, student loans’ resumption stands to push their hard-earned financial gains back. FICO found that 14.1% of Gen Z’s credit scores plunged 50+ points in April, likely as a result of missed student loan repayments. 

Banking impacts: Almost half of US consumers are delaying major financial decisions such as buying a house or retiring because of their student loan debt, per a recent Empower study. This can drastically reduce demand for banking products such as mortgages, auto loans, and various savings and investment accounts. With these milestone delays, banks risk losing both short-term lending revenues and long-term customer relationships. 

At the same time, the pressure creates an opening for banks to step in with debt-conscious products and financial wellness tools—from refinancing options to advisory services that balance repayment with savings goals. 

Our take: Under the threat of wage garnishment, student loan payments likely will become priority No. 1 for consumers at the expense of their credit cards and other credit products. 

Issuers need to offer products to help mitigate additional stress for embattled younger consumers, through expanded card-linked installment options that help cardholders avoid lofty interest rates as they pay down debts.

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