40 Percent of Student Loan Borrowers Have Not Made Payments: Education Department Data

The Columbia University campus in New York in a file photo. Mario Tama/Getty Images

Millions of student loan borrowers have not made payments since the pandemic-era pause on payments expired in October, according to new U.S. government data.

In a Dec. 15 blog post, Department of Education Under Secretary James Kvaal wrote that just 60 percent of the approximately 22 million people who had their student loan payments resumed have made a payment by the middle of November. This is equal to about nine million individuals who have not submitted a payment.

The data does not include borrowers who did not have a payment due in October, have returned to school, or have been covered by the federal government’s recent measures responding to servicing errors.

Mr. Kvaal noted many borrowers “are confused or overwhelmed about their options.” He added that repayment challenges were common before the public health crisis “because they were delinquent or obtained a deferment or forbearance.”

“In the meantime, we will continue to give borrowers the information and support they need to take advantage of all of the benefits of federal student loans,” he wrote in the post.

“We have given clear guidance to our student loan servicers that they will be held accountable if they don’t meet their basic contractual obligations to borrowers and the Department.”

He added that borrowers struggling to budget monthly student loan payments will be “protected from the worst consequences of missed payments through the on-ramp.”

The Department of Education established the 12-month on-ramp program. This is an initiative that will last until September, offering leniency to borrowers and preventing them from facing “the harshest consequences of missed payments,” including default, delinquency, and mandatory collections.”

It is estimated that roughly 43 million borrowers owe the U.S. government about $1.7 trillion in student loan debt.

As part of the government’s response to the pandemic in March 2020, then-President Donald Trump implemented a freeze on student loan payments. It was then extended nine times by Congress and former President Trump and President Joe Biden.

The emergency relief measure expired in October, while interest on student loans started accruing in September.

Over the last 18 months, the current administration has approved $132 billion in student debt cancelation, impacting more than 3.6 million people.

The latest move is a Dec. 6 announcement that includes remedying errors made by the Department of Education to income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF), totaling close to $5 billion in forgiveness.

“From Day One of my Administration, I vowed to improve the student loan system so that a higher education provides Americans with opportunity and prosperity — not unmanageable burdens of student loan debt,” President Biden said in a statement.

“I won’t back down from using every tool at our disposal to get student loan borrowers the relief they need to reach their dreams.”

Borrowers Struggling, Polling Shows

When it was announced that student loan payments would resume, various surveys warned that borrowers would struggle to make payments.

In July, a Life and My Finances poll discovered that half of student borrowers could not afford to repay student loans on their current income. Nearly one-fifth of the respondents noted that they would have to borrow the money to repay their student loans.

After the White House announced plans to forgive at least $10,000 for federal borrowers and up to $20,000 for students receiving a federal Pell Grant while in school, an Intellingent.com survey learned that more than one-third of borrowers spent funds they thought would be part of President Biden’s student debt relief initiative.

The Supreme Court struck down the plan in June.

Many borrowers were also unaware of how much student loan debt they had.

This past summer, a NerdWallet survey showed that 46 percent of individuals with student loans did not know how much they owed the government.

The same poll found that most borrowers used the would-be student loan payments to pay for the basics, like food and rent.

President Joe Biden announces student loan relief with Education Secretary Miguel Cardona in the Roosevelt Room of the White House in Washington on Aug. 24, 2022. Olivier Douliery/AFP via Getty Images

According to a recent Bloomberg-Morning Consult poll, 43 percent of young voters in seven swing states—Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin—said President Biden is not doing enough to address student loan payments.

Roughly the same number of respondents noted that they have heard, read, or seen “not much” or “not at all” about the $132 billion in student debt forgiveness. More than half (59 percent) supported these efforts.

Effects on the Economy

Economists have warned that the resumption of student loan bills for 40 million Americans could have consequences for the broader economy.

“The economy will struggle in the fourth quarter, in meaningful part due to the end of the student loan payment moratorium,” Mark Zandi, chief economist at Moody’s Analytics, told CNBC in October.

The Kobeissi Letter, a financial research newsletter, projected that about $9 billion in consumer spending would be eliminated every month.

“Roughly $100 billion per year will be subtracted from consumer spending, mainly with an impact on younger consumers. Another large shift in consumer spending is coming,” it wrote on X.

A Moody’s Analytics report warned that a decline in discretionary budgets would affect the retail industry.

“The retail sector has seized an opportunity during the pandemic due to limited inventory growth over prior years and pent-up demand. But financial buffer losses could shake up the retail demand in response to young consumers’ change of budget and even potential cutbacks on service spending,” Moody’s economists wrote.

Retailers have taken notice.

Michael Fiddelke, the Target CFO, warned in an earnings call this past summer the resumption of student loan repayments would apply “additional pressure on the already strained budgets of tens of millions of households.”