Roughly one in five borrowers repaying federal Direct Loans tied to Alabama colleges is more than 90 days delinquent, according to federal data released last week.
The estimated nonpayment rate crept up to 19.7%, just above the 19.3% rate last summer. The increase is small, but the lack of improvement is not good news.
That is because federal education officials consider nonpayment as an early warning of how many borrowers could eventually default.
High default rates can carry consequences not only for borrowers, but also for the colleges they attended. Institutions can lose access to federal student loans and Pell Grants if their official default rates become too high.
For now, the overall picture at Alabama colleges has changed little. Twenty Alabama institutions – public, private nonprofit and for-profit – had nonpayment rates of at least 30%, the same number as last year.
The institutions with the highest rates also remained largely the same. There was some movement: however, two public community colleges moved above 30% and two proprietary institutions moved above 40%.
The table below shows each institution’s newly released nonpayment rate alongside last year’s rate. Click here if you are unable to see the table.
What the nonpayment rate measures
The nonpayment rate measures the percentage of federal Direct Loan borrowers who entered repayment beginning in January 2020 and were more than 90 days delinquent when the data were collected.
The calculation includes borrowers whose loans were in repayment, deferment, forbearance, delinquency or default. The latest data were run in late May 2026.
Being more than 90 days delinquent is not the same as being in default, which generally occurs after at least 270 days, or about nine months, without required payments.
The rates are tied to the institutions borrowers attended, regardless of where they now live, and do not include private student loans.
Why the rates matter to colleges
The nonpayment rates give colleges an idea of how many of their borrowers could eventually default. The federal government separately tracks those defaults through an institution’s cohort default rate.
That rate measures the percentage of borrowers who enter repayment during a federal fiscal year and default before the end of the following two fiscal years.
If an institution’s cohort default rate is at least 30% for three consecutive years, it can lose access to both federal Direct Loans and Pell Grants for three years. A rate greater than 40% for a single year can result in the loss of Direct Loan eligibility for three years.
Either penalty could make it harder for students to afford attending the college and could hurt enrollment.
The Education Department is expected to publish its next official cohort default rates in September. Those rates will cover borrowers who entered repayment during fiscal year 2023, although the pandemic-era payment pause may limit how clearly they reflect current repayment problems.
The nonpayment rates give colleges a more up-to-date look at repayment problems that could eventually show up in future cohort default rates.
Alabama borrowers already in default
A separate federal report shows that about 169,000 borrowers in Alabama were in default on approximately $4.3 billion in federal student loans as of March.
Nationwide, about 9 million borrowers were in default on $220 billion in federal student loans.
Those statewide figures are based on borrowers associated with Alabama, while the institutional nonpayment rates are tied to the colleges borrowers attended. The reports measure different populations and should not be combined.
Repayment system changing
The latest figures come as the federal student loan system is going through another round of major changes.
Beginning July 1, borrowers will have access to new repayment options, while several existing income-driven plans are scheduled to end in 2028. Eligible borrowers enrolled in automatic payments also will temporarily receive a 1-percentage-point interest-rate reduction, up from the usual quarter-point reduction.
Borrower advocates and higher-education groups have warned that repeated changes to repayment plans and the movement of some student loan responsibilities between federal agencies could create confusion and administrative barriers.
Borrowers already in default generally must resolve it through options such as consolidation or rehabilitation before enrolling in a repayment plan and receiving benefits available to borrowers in good standing.
Default can damage a borrower’s credit and add collection costs. Borrowers also could face wage garnishment or the withholding of tax refunds and other federal payments when involuntary collections resume.
The Education Department delayed those collection measures in January and has not announced a new start date. Defaults are still reported to credit bureaus, and borrowers remain responsible for resolving their loans.