Who benefits from the student loan payment pause and what will happen when it ends?

POLICY BRIEF: Who benefits from the student loan payment pause and what will happen when it ends? PDF

PRESS RELEASE: Analysis Finds 7.8 Million Borrowers Are at High Risk of Missing Payments if Student Loan Pause Ends in May

At the start of the COVID-19 pandemic, the federal government stopped requiring payment on most federal student loans. This “payment pause” was originally set to expire in September 2020, but after several extensions it is set to expire May 1, 2022. Using anonymized credit records, we describe who was affected by the payment pause, how it impacted their finances, and what might happen when the payment pause ends.

Select media coverage

Marketplace: So … whaddya wanna know about student loan repayments? (July 27, 2023)
the Economist: The moratorium on repaying student loans in America was a bad idea (June 1, 2023)
Business Insider: 7 million student-loan borrowers who fell behind on payments just got a ‘fresh start’ and will return to good standing, Biden’s Education Department says (April 6, 2022)
Spectrum 1 News: Spectrum 1 News Segment on Student Loan Pause Being Extended (April 6, 2022)
GV Wire: Pause on Student Loan Debt Loosened Chokehold on Burdened Borrowers (April 5, 2022)
Nerdwallet: How the student loan pause has played out for borrowers (March 31, 2022)
Yahoo! Finance: Student loans: Borrowers are ‘facing a financial cliff that could be disastrous,’ advocate says (March 30, 2022)
Davis Enterprise: Half-a-million Californians at risk of missing student loan payments if pause expires (March 24, 2022)
KMAX Sacramento: KMAX Sac Segment on Student Loan Pause (March 24, 2022)
Sacramento Bee: More than 500,000 in California will struggle to pay student loans once pause ends, study finds (March 23, 2022)
Business Insider: 7.8 million student-loan borrowers are at ‘high-risk’ of being unable to pay if Biden resumes payments in May, analysis says (March 23, 2022)
The Hill: 7.8M people at high risk of struggling to pay student loans if pause expires (March 23, 2022)
Yahoo News: 7.8 million people at high risk of struggling to pay student loans if pause expires (March 23, 2022)
Capital Public Radio: Capital Public Radio segment on Student Loan Pause (March 23, 2022)

Key Research Findings

Key Finding 1: The student loan pause accomplished its principal aim of alleviating student loan repayment burdens during the pandemic. Affected borrowers had their overall monthly debt obligations fall by an average of $210 each month as a result of the pause.

Key Finding 2: Pause-affected borrowers experienced improved credit outcomes during the pause. The average credit score among affected borrowers rose from 640 to 668. Forty-four percent of affected borrowers reduced their utilization of credit cards and other revolving credit during the payment pause, by an average of 23%. And 6% of affected borrowers voluntarily increased their payments on other installment loans during the payment pause by paying more than the scheduled monthly payment on an auto or mortgage loan.

Key Finding 3: If the payment pause were to end in May, we estimate that 7.8 million borrowers currently under the payment pause — nearly three in ten — are at high risk of missing payments once the pause expires. These borrowers owe nearly $280 billion in paused student loans. Though we cannot directly observe the racial identity of these borrowers in the data, they are more likely to live in neighborhoods with a high proportion of Black residents than other paused borrowers.

Key Finding 4: Affected borrowers span a large range of ages, as do student loan borrowers generally. The average age is 36, and 15% of affected borrowers are over age 50. The average amount of paused loans per affected borrower is approximately $36,800, though 31% of the group owed under $10,000.

Key Finding 5: There are approximately 2.5 million paused-affected borrowers in California.

Suggested Citation

Ghoshal-Datta, N., Jambulapati, V., White, E. (2022). Who benefits from the student loan payment pause and what will happen when it ends?. California Policy Lab. https://www.capolicylab.org/who-benefits-from-the-student-loan-payment-pause-and-what-will-happen-when-it-ends/

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