Unlicensed OneDrive Storage Stops Being Free on January 27, 2025
TL;DR
- Starting January 27, 2025, OneDrive accounts unlicensed for more than 93 days are either archived (if a retention policy applies) or moved to the recycle bin and permanently deleted.
- Reactivating an archived OneDrive account costs $0.60 per GB, and storage billing of $0.05 per GB per month then applies to all archived accounts, not just the one reactivated.
- An organization with 100 unlicensed 1 TB accounts would pay $614.40 to reactivate one account and $5,120 per month in storage for the archived pool.
- The change closes the loophole where stripped-license or long-retention OneDrive data was stored indefinitely at no cost; EDU, GCC, and DoD tenants are excluded.
- The SharePoint admin center's unlicensed users report shows exactly which OneDrive accounts are exposed before enforcement begins.
For years, Microsoft 365 had a quiet loophole: strip a departed user's license, leave the account in place, and their OneDrive data sat there indefinitely, at no cost, forever. On January 27, 2025, that loophole closes, and Microsoft's own support article explaining it is confusingly written enough that we are going to translate.
The change in one paragraph: OneDrive accounts that have been unlicensed for more than 93 days will either move to the recycle bin and then be permanently deleted, or, if they fall under a retention policy, be archived behind reactivation fees and monthly storage costs. The changes do not apply to EDU, GCC, or DoD customers. Microsoft's article: Manage unlicensed OneDrive user accounts (opens in new tab).
How OneDrive retention works today, and the loophole closing
The current state:
- When a user is deleted or taken through the user deletion wizard, their OneDrive data is preserved for 30 days, then moves to a recycle bin where an admin can recover it with PowerShell for up to 93 days.
- Custom retention policies can be set in the SharePoint admin center or the Compliance admin center.
- If a user is simply unlicensed, their OneDrive data can be retained indefinitely.
That last bullet is the free-storage loophole. Picture a high-churn company that never deletes terminated users, just strips the license and disables the account, or one with a 10-year retention policy, or both. That company could have 100 active employees and another 500 disabled accounts sitting on 10 TB of OneDrive storage they technically do not pay for today. That is what Microsoft is solving for.
The user deletion wizard:
Retention policy configuration:
What changes on January 27, 2025
- Deleted users follow the same default retention and deletion flow that exists today.
- If retention policies extend beyond the default 30 days, OneDrive accounts from deleted users are archived after 93 days.
- Any unlicensed account is archived after 93 days by default, whether or not a retention policy applies.
- Accessing files in archived accounts requires a one-time activation fee of $0.60 per GB, after which you pay $0.05 per GB per month for all archived accounts, not just the one you accessed.
That "all archived accounts" detail is the expensive part. Microsoft's own example: an organization has 100 unlicensed OneDrive accounts, each consuming 1 TB, for 100 TB total. Enforcement archives them between January and March 2025. In October 2025 the organization needs one specific account back and sets up billing. The costs:
- A one-time reactivation fee of $0.60 per GB for that 1 TB account: $614.40.
- A monthly storage fee of $0.05 per GB across the full 100 TB: $5,120 per month from October 2025 onward.
One account retrieved, the whole archive billed.
What happens if you take no action?
- You are not automatically enrolled into paying anything.
- Unlicensed OneDrive accounts older than 93 days get archived and become inaccessible unless you pay the reactivation fee plus the ongoing monthly storage cost.
- Unlicensed accounts older than 93 days with no custom retention policy move to the recycle bin for another 93 days and are then permanently deleted.
So inaction costs nothing in dollars, but it can cost data, and it removes your cheap options once the archive clock runs out.
Find your exposure in the SharePoint admin center
You can identify unlicensed OneDrive accounts today:
- Sign in to the SharePoint admin center with your work or school account.
- Go to Reports and select User reports.
- Under OneDrive usage, select Unlicensed users.
- Download the report as a CSV file.
- Starting January 2025, an interactive UI is available where you can select a username to view details.
Four ways to respond, ranked by how much process you want
Inform customers and change nothing else. In a sane offboarding process, granting another user (typically the manager) access to the departed user's OneDrive for 30 days is enough time to pull what matters, and admins still have the 93-day recycle bin window beyond that. Customers who insist on longer retention or carry compliance obligations need to hear the next option.
Put the fees in writing with a waiver. Instead of debating whether anyone will ever need files beyond the 93-day window, make it black and white: the client signs a waiver agreeing to pay the archive fees, or accepts a limited retention policy for unlicensed accounts. You have no idea what those fees will total in advance. Depending on the account sizes being archived, they could be trivial or they could be substantial, so do not absorb that uncertainty yourself.
Lean on third-party backup. If third-party backup is in place, and it should be, you can restore a departed user's data into a SharePoint site later without touching Microsoft's archive billing at all.
Relicense a single account. If the identity was never deleted, adding a OneDrive license back to the account reactivates that one OneDrive without triggering the Microsoft 365 backup billing motion that charges for all archived data. This is the move when the archived pool is large and the need is narrow.
There are other plays for unique customer scenarios, but those four cover the top considerations.
References
Frequently asked questions
Will Microsoft automatically start charging for archived OneDrive accounts?
No. You are not automatically enrolled into paying anything. Charges only begin if you choose to reactivate archived accounts, at which point the one-time reactivation fee and monthly storage billing for all archived accounts apply.
Does this change affect every Microsoft 365 tenant?
No. EDU, GCC, and DoD customers are excluded from the January 27, 2025 enforcement.
What happens to unlicensed OneDrive accounts with no retention policy?
After 93 days unlicensed, the data moves to the recycle bin for another 93 days and is then permanently deleted. Only accounts covered by a retention policy get archived instead of deleted.
Know which tenants have OneDrive exposure before the fees do
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Written by
Nick Ross
CEO · Microsoft MVP · Founder, T-Minus 365
Nick is not just a CEO, he's a respected thought leader and influencer in the MSP space. Tens of thousands of MSPs learn through his YouTube channel, T-Minus365. Nick has been honored as a three-time Microsoft MVP for his educational content; his expertise and influence are the backbone of our mission, ensuring that you are in the best hands when it comes to security.
Nick joined Pax8 in 2017, where he would ultimately oversee product management for PSA and Microsoft integrations. Following his tenure at Pax8, Nick has continued to demonstrate his leadership prowess as an executive at various MSPs, culminating in his most recent role at Sourcepass.
Nick holds a Bachelor's Degree in Business Management from Florida State University, as well as a Minor Degree in Entrepreneurship. In his free time, Nick is an avid hiker, reader, and fitness-junkie.
