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By Suzanne Blake
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Millions of Americans with federal student loans have seen a sharp rise in monthly payments, with Gen Z borrowers now facing the steepest costs.
New survey data from Empower reported that Gen Z participants pay an average of $526 per month toward student loans, significantly above the overall average payment of $284 for all age groups.
The findings come as borrowers respond to the end of pandemic-era payment relief and major legislative changes in 2025 that eliminated income-driven repayment options, increasing financial strain for the newest generation in the workforce.
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Why It Matters
The surge in loan payments for Gen Z is reshaping the financial futures of millions of young Americans.
With nearly one-third of all borrowers experiencing increased monthly payments in 2025, more than half (56 percent) say their student loan obligations limit their ability to save or invest. Almost half delay major life milestones like buying a home or planning for retirement.
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What To Know
While the average student loan payment is $284, Gen Z was paying substantially more, with an average of $526 each month, according to the Empower survey of more than 400 student loan borrowers.
"Gen Z is facing the highest student loan payments largely due to the interest rates on their loans," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. "Over the years, those rates have steadily climbed, and this generation is bearing the brunt of that increase. As a result, their monthly payments are significantly higher than those of previous borrowers."
Across all borrowers surveyed, 34 percent said they were paying $200 or more per month.
The added stress has not only affected finances but also mental health, with 59 percent of borrowers reporting anxiety related to their debt.
And borrowers are not always prioritizing their student loan debt, as 54 percent said they prioritize other types of debt, like credit cards and car loans.
The burden on Gen Z has grown in the wake of the One Big Beautiful Bill Act signed by President Donald Trump that removed the income-driven repayment plans established during President Joe Biden's administration.
Under the new law, available repayment options provide less relief for those earning lower incomes, especially younger borrowers just starting their careers.
The end of the pandemic-era forbearance and stricter repayment requirements have produced heightened monthly payments, with substantial repercussions for budgeting and debt prioritization among Gen Z and millennials.
Collectively, Americans now owe more than $1.7 trillion in student loan debt, with balances having increased sixfold since 2003. As of 2024, 42.7 million Americans held federal student loans, and a significant portion are delinquent on their payments.
As loan repayment resumed, only 22 percent of Gen Z borrowers felt confident about paying back their student loans, Empower found.
Half of all borrowers contributed less to savings or retirement accounts as a result of their debt. Additionally, the lingering debt has led 42 percent of borrowers to wish they had chosen a different major or school, and 57 percent now say they regret their level of indebtedness.
"Long-term, this is going to delay major milestones: starting families, buying homes and climbing the career ladder," Thompson said. "Many will feel pressured to stay with companies that offer student loan repayment perks, curbing their upward mobility and locking them into jobs they might otherwise leave."
What People Are Saying
Rebecca Rickert, head of communications and consumer insights at Empower, told Newsweek: "When post-grads are spending over $500 a month on loan payments, it can push other financial priorities like emergency savings or homeownership down the list. This is often coupled with more reliance on credit, and later entry into financial independence."
Leslie Silva, principal attorney with McCall Sweeney & Silva P.C and a student loan expert, told Newsweek: "The current student loan system, and the changes in the new domestic policy bill, do nothing to help borrowers alleviate the burden of the cost of higher education. Half of millennial and Gen X borrowers have suffered delays in other major financial decisions due to student loan debt. The new bill places limits on what parents and borrowers can apply for to fund higher education. While some hope that these limits force institutions to lower their costs, that is a very unlikely outcome."
Kevin Thompson, CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "The current student loan system, in my opinion, was designed to keep borrowers tied to the workforce. This wasn't by accident, it was by design. By saddling young people with debt early, the system ensures a steady flow of labor from a group that must keep earning just to stay afloat."
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek: "They [Gen Z] enrolled and completed college at a time when the cost of tuition and housing had risen dramatically, and, on top of those elevated prices, those who attended in the last few years have had to take out loans with higher interest rates. The result is higher monthly payments that are creating real hardship for some borrowers who are just getting started in their careers."
What Happens Next
Borrowers previously enrolled in income-driven plans face a transition period of at least one year and, starting July 2026 to July 2028, will have select new repayment arrangements as the latest legislation takes effect.
Gen Z and other borrowers are likely to face ongoing financial strain, delayed major life decisions, and an increasing demand for financial guidance amidst the rapidly changing student loan policy landscape.
Silva said that moving forward, students and parents should expect to pay more out of pocket or rely more on private loan companies as the changes take effect.
"We can expect to see a resurgence in private student loans forcing new student borrowers into even more debt at higher interest rates. Private student loan companies do not have a limit on applicable interest rates, whereas federal student loans do," Silva said.
And the more debt student borrowers have, the longer it will take them to buy homes or contribute to retirement plans, Silva added.
"It is possible we could see more support from the institutions themselves, but there has not been much evidence to support a decrease in the cost of higher education," Silva said.
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